QUESTIONS    OF    THE   DAY. 


(The  numbers  omitted  represent  Monographs  no  longer  in  print.) 
3— Our  Merchant  Marine.     By  DAVID  A.  WELLS.     Octavo,  cloth  i  oo 

5  &  6— The  American  Citizen's  Manual.     Edited  by  WORTHINGTON 
C.  FORD.     Part  I. — Governments  (National,  State,  and  Local),  the 


LIBRARY 


UNIVERSITYyOF  CALIFORNIA. 


^Accession  No. 

"/" 


^fy(2^/ 

T 


.    Clats  No. 


23 — oociai  economy,     -tfyj.  ii.  inoroia  Kogers.     octavo  . 


75 


24— The  Histbry  of  the  Surplus  Revenue  of  1837.     By  EDWARD  G. 
BOURNE.     Octavo,  cloth i  25 

25— The    American    Caucus    System.      By    GEORGE    W.    LAWTON. 
Octavo,  cloth,  i.oo  ;  paper 50 

26 — The  Science  of  Business.    By  R.  H.  SMITH.    Octavo,  cloth  .     i  25 

28 — The   Postulates  of  English   Political  Economy.     By  WALTER 
BAGEHOT.     Octavo,  cloth i  oo 

30 — The  Industrial  Situation.  By  J.  SCHOENHOF.  Octavo,  cloth,  i  oo 
35 — Unwise  Laws.  By  LEWIS  H.  BLAIR.  Octavo,  cloth  .  .100 
36 — Railway  Practice.  By  E.  PORTER  ALEXANDER.  Octavo,  cloth,  75 

37 — American   State   Constitutions:    A   Study  of 'their  Growth.     By 
HENRY  HITCHCOCK,  LL.D.     Octavo,  cloth  ....        75 

38 — The   Inter-State  Commerce  Act :  An  Analysis  of  its  Provisions. 
By  JOHN  R.  Dos  PASSOS.     Octavo,  cloth       .         .         .         .     i  25 

39— Federal  Taxation  and  State  Expenses ;  or,   An  Analysis  of  a 
County  Tax-List.     By  W.  H.  JONES.     Octavo,  cloth    .         .100 


QUESTIONS   OF   THE   DAY. 


40 — The  Margin  of  Profits.     By  EDWARD  ATKINSON.     Together  with 

the  Reply  of  E.  M.  CHAMBERLAIN,  Representing  the  Labor  Union, 

and  Mr.  Atkinson's  Rejoinder.  Cloth,  75  cents  ;  paper  .  .  40 
42 — Bodyke  :  A  Chapter  in  the  History  of  Irish  Landlordism.  By 

HENRY  NORMAN.  Octavo,  cloth,  illustrated  .  .  .  '  75 
43 — Slav  or  Saxon  :  A  Study  of  the  Growth  and  Tendencies  of  Russian 

Civilization.  By  WM.  D.  FOULKE,  A.M.  Octavo,  cloth  .  I  oo 
44 — The  Present  Condition  of  Economic  Science,  and  the  Demand 

for  a  Radical  Change  in  its  Methods  and  Aims.     By  EDWARD 

C.  LUNT.  Octavo,  cloth 75 

46 — Property  in  Land.  By  HENRY  WINN.  Octavo,  paper  .  25 
47— The  Tariff  History  of  the  United  States.  By  F.  W.  TAUSSIG. 

Revised,  and  with  additional  material.  Octavo  .  .  i  25 

48 — The  President's  Message,  1887.  With  annotations  by  R.  R. 

BOWKER.     Octavo,  paper       .......         25 

49 — Essays  on  Practical  Politics.  By  THEODORE  ROOSEVELT. 

Octavo,  cloth 75 

50 — Friendly  Letters  to  American  Farmers  and  Others.  By  J.  S. 

MOORE.     Octavo,  paper          .......         25 

52 — Tariff  Chats.  By  HENRY  J.  PHILPOTT.  Octavo,  paper  .  25 
53— The  Tariff  and  its  Evils  ;  or,  Protection  which  does  not  Protect. 

By  JOHN  H.  ALLEN.  Octavo,  cloth I  oo 

54— Relation  of  the  Tariff  to  Wages.  By  DAVID  A.  WELLS.  Octavo, 

paper     ...........         20 

55 — True  or  False  Finance.  The  Issue  of  1888.  By  a  Tax-Payer. 

Octavo,  paper         .........         25 

56 — Outlines  of  a  New  Science.  By  E.  J.  DONNELL.  Octavo,  cloth, 

i  oo 
57 — The  Plantation  Negro  as  a  Freeman.  By  PHILIP  A.  BRUCE. 

Octavo,   cloth          .         .         .         .         .         .         .         .         .     i  25 

58 — Politics  as  a  Duty  and  as  a  Career.  By  MOORFIELD  STORY. 

Octavo,  paper         .........         25 

59 — Monopolies  and  the  People.  By  CHAS.  W.  BAKER.  Octavo,  cloth. 

i  25 
60 — The  Public  Regulation  of  Railways.  By  W.  D.  DABNEY, 

Octavo   .         .         .         .         .         .         .         .         .         .         .     i  25 

61 — Railway  Secrecy  and  Trusts;  Its  Relation  to  Inter-State  Legisla- 
tion.    By  JOHN  M.  BONHAM.     Octavo  .         .         .         .         .100 

62 — American  Farms  :  Their  Condition  and  Future.  By  J.  R.  ELLIOTT. 

Octavo I  25 


NATURAL  TAXATION 


AN  INQUIRY  INTO  THE  PRACTICABILITY,  JUSTICE 

AND    EFFECTS   OF   A  SCIENTIFIC   AND 

NATURAL    METHOD    OF 

TAXATION 


BY 
THOMAS   G.  SHEARMAN 


OF  THE 

"UNIVERSITY 


G.  P.  PTJTNAM'S  SONS 

NEW   YORK         "..,  LONDON 

27   WEST  TWENTY-THIRD   STREET  24   BEDFORD   STREET,   STRAND 

C|je  ftmtherbother  |)nss 


COPYRIGHT,  1895 

BY 
THOMAS  G.  SHEARMAN 

Entered  at  Stationers'  Hall,  London 


Ubc  Tknicfcerbocfccr  iprcss,  flew 


CONTENTS. 


CHAPTER  PAGE 

I.     INTRODUCTORY i 

II.  CROOKED  TAXATION   .         .         .         .         .         .6 

III.  DIRECT  TAXATION 39 

IV.  TAXATION  OF  PERSONAL  PROPERTY  .  -49 
V.  TESTIMONY  OF  EXPERIENCE        ....       70 

VI.  EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS       84 

VII.  TAXATION  OF  WOMEN  AND  CHILDREN       .  ^    .     101 

VIII.  TAXATION  OF  IMPROVEMENTS     .         .         .  •       .     106 

-IX.  THE  NATURAL  TAX    ...                  .         .     115 

-  X.  ONE  TAX  ENOUGH     ......     136 

XI.  JUSTICE  OF  NATURAL  TAXATION        .         .         .     165 

XII.  WHERE  THE  BURDEN  FALLS       .         .         .         .174 

XIII.  SOCIAL  EFFECTS  OF  NATURAL  TAXATION          .     199 

INDEX 225 


NATURAL  TAXATION. 


CHAPTER  I. 
INTRODUCTORY. 

§  I.  Is  there  any  natural  taxation?  Is  there  any 
such  thing  as  a  natural  or  strictly  scientific  method  of 
taxation  ?  Almost  all  self-styled  practical  men  scornfully 
deny  that  there  is ;  and  in  this  denial,  for  once,  the 
professors  of  economic  science,  whom  they  contemn, 
seem  to  agree  with  them.  It  is  more  than  doubtful 
whether  any  such  writer  upon  the  subject  recognizes  any 
natural  form  of  taxation  ;  while  Professor  Perry  distinctly 
asserts:  "  There  can  be  no  science  of  taxation";  and: 
"  Nature  has  given  no  whisper,  that  we  can  hear,  about 
any  taxes.1  "  Professor  Sumner  also  says  :  "  There  are 
no  natural  laws  of  taxation."  Of  course,  all  good  protec- 
tionists cordially  indorse  these  opinions. 

Nevertheless,  is  this  consensus  of  opinion  well  founded  ? 
Is  it  true  that  Nature  has  nothing  to  say  on  this  subject  ? 
Is  it  true  that  there  is  and  can  be  no  science  of  taxation  ? 
If  it  is,  then  Nature  can  have  nothing  to  say  about  gov- 
ernment, and  all  talk  of  the  science  of  government  is 
folly.  For  government  implies  taxation,  as  truly  as  the 

1  Perry's  Pol.  Economy  (2oth  ed.),  581, 


2  NATURAL  TAXATION. 

existence  of  animated  nature  implies  food.  Taxation  is 
the  indispensable  condition  of  all  government.  Taxes  are 
the  food  upon  which  it  lives.  Without  taxes  it  must  die. 
If  all  offices  of  government  were  filled  gratuitously,  it 
would  none  the  less  be  maintained  by  taxation,  although 
the  only  direct  taxpayers  would  be  the  office-holders. 
Just  as  certainly  as  the  existence  of  the  body  implies  a 
science  of  food,  the  existence  of  human  society  implies  a 
science  of  taxation. 

For  society  and  civilization,  the  value  of  which  is  be- 
yond all  computation,  cannot  exist  without  government, 
and  government  cannot  exist  without  taxation.  If  there 
is  any  real  social  science,  that  science  must  include  all 
things  which  are  essential  to  the  existence  of  society. 
If  it  is  true  that  taxation  is  necessary,  that  it  is,  upon  the 
whole,  productive  of  good,  even  under  its  present  chaotic 
conditions,  and  that  it  does  return  an  equivalent  to 
society,  does  it  not  follow  that  a  thing  so  necessary  and 
so  naturally  beneficial  can  be  brought  into  harmony  with 
natural  laws  and  organized  upon  a  basis  of  principle  ?  To 
say  that  it  never  can  be,  simply  because  no  one  has  yet 
defined  the  principle  upon  which  it  should  rest,  is  almost 
as  absurd  as  to  say  that  the  law  of  gravitation  did  not 
exist  until  Newton  invented  it.  Gravitation  in  the  uni- 
verse is  not  more  inevitable  than  taxation  in  civilized 
society.  We  may  be  sure  that  there  is  a  science  of  taxa- 
tion, and  that  Nature  has  much  to  say  about  it,  if  we  will 
only  listen  to  her  voice. 

How  can  we  learn  the  teachings  of  Nature  upon  this 
subject?  How  does  Nature  teach  us  anything?  Is  it  not 
by  the  stern  pressure  of  necessity,  driving  us  forward, 
while  every  path,  except  the  right  one,  is  hedged  up  with 
difficulties  and  penalties?  Nature  tells  us  nothing,  in 
plain  words,  but  while,  on  the  one  hand,  she  makes  it  im- 


INTRODUCTORY.  3 

possible  for  us  to  stand  still,  she  walls  up,  on  the  other 
hand,  the  door  to  every  wrong  path.  It  is  an  invisible 
wall,  against  which  we  blindly  dash  ourselves,  again 
and  again,  until  at  last  we  learn  the  lesson  and  grope 
our  way  to  the  only  open  door.  Even  so,  Nature  shuts 
the  door  in  our  faces,  as  we  try  one  method  of  taxation 
after  another ;  until  at  last  we  stumble  upon  a  path,  the 
door  of  which  is  wide  open,  and  which  is  not  obstructed 
by  insuperable  obstacles.  Then,  it  may  be,  we  shall  find 
not  only  that  the  mecnod  of  taxation  thus  indicated  is  the 
easiest  and  best  one,  but  also  that  Nature  has  all  along 
collected  taxes  by  this  method,  while  we  have  wasted  our 
efforts  in  double  taxation,  to  the  vast  injury  of  the  whole 
human  race. 

Let  us  then,  before  seeking  to  find  a  method  affirma- 
tively pointed  out  by  Nature,  inquire  into  the  working 
and  effects  of  the  methods  commonly  in  use,  and  the  tes- 
timony of  experience  as  to  their  results. 

§  2.  Bad  effects  of  existing  system.  The  condition 
of  society,  in  the  most  highly  civilized  countries,  is  suf- 
ficient proof  that  Christianity  and  civilization  have  thus 
far  failed  to  produce  the  beneficial  effects  which  might 
reasonably  be  expected  of  them.  A  few  absurd  opti- 
mists strive  to  convince  us  that  all  is  for  the  best,  in 
this  best  of  all  possible  worlds ;  but  the  common-sense  of 
mankind,  and  especially  of  the  prosperous  classes  them- 
selves, is  fully  convinced  that  there  is  something  radically 
wrong  in  our  civilization.  Analogies  must  not  be  pushed 
too  far ;  but  they  must  be  used,  though  not  abused. 
When  a  sensible  physician  is  called  to  advise  upon  a  case 
of  chronic  indigestion,  his  first  inquiry  is  concerning  the 
food  upon  which  the  patient  has  lived.  Bad  food  may 
not  be  the  only  cause;  but  if  the  patient's  food  is  clearly 
bad,  the  physician  reforms  that,  before  he  attempts  to  re- 


4  NATURAL  TAXATION. 

form  anything  else.  When  we  find  society  in  an  un- 
healthy state,  wealth  unequally  and  unjustly  distributed, 
idle  people  rich,  industrious  people  poor,  gambling  en- 
couraged, industry  and  commerce  discouraged,  desperate 
and  degrading  poverty  side  by  side  with  excessive  and 
wasted  wealth,  it  is  not  a  mere  delusion,  as  some  would 
have  us  believe,  which  leads  us  to  say  that  these  are  the 
results  of  bad  government.  But  when  we  seek  for  the 
causes  of  bad  government,  why  should  we  not  do  as  we 
would  in  the  case  of  the  human  body,  and  ask  upon  what 
food  this  government  has  lived  ?  Bad  taxation  is  as  cer- 
tain to  produce  bad  government  and  bad  social  condi- 
tions, as  is  bad  food  to  produce  indigestion  and  decay  in 
the  human  body.  And  as  no  medicine,  in  the  long  run, 
can  supply  the  place  of  good  food,  so  no  other  social  re- 
forms can  ever  bring  social  health,  so  long  as  unjust  and 
unscientific  forms  of  taxation  are  continued. 

§  3.  Bad  taxation  destructive  of  society.  Just  as 
the  human  body  can  sustain  life  for  a  long  time  upon 
poor  food,  taken  irregularly,  at  wrong  times,  and  in  wrong 
proportions,  so  government  can  be  sustained  for  an 
indefinite  period  upon  bad  taxes,  oppressive,  unjust, 
badly  collected,  and  in  many  respects  injurious.  But,  as 
bad  food  breaks  down  the  health  and  shortens  the  life  of 
the  body,  so  bad  taxes  destroy  the  health  and  sometimes 
even  the  life  of  the  state.  The  Roman  Empire  owed  its 
destruction  as  much  to  bad  taxation  as  to  slavery  itself. 

What  are  bad  taxes?  Surely,  all  taxes  are  bad,  which 
bear  most  heavily  upon  those  who  are  least  able  to  pay 
and  who  derive  the  least  benefit  from  government.  Any 
tax  is  bad,  which  takes  from  the  poverty  of  the  poor  to 
add  to  the  wealth  of  the  rich.  Any  tax  is  bad,  which 
can  be  easily  evaded  by  fraud  or  falsehood,  and  is  thereT 
fore  paid  only  by  the  honest  and  truthful.  Any  tax  is 


IN  TROD  UC  TOR  Y.  5 

bad,  which  can  only  be  collected  by  oppressive  and  de- 
grading methods.  Any  tax  is  bad,  which  unnecessarily 
hinders  the  increase  of  wealth'  and  comfort  among  the 
people  as  a  whole.  Any  tax  is  bad,  which  corrupts  the 
morals  of  the  people  or  which  necessarily  brings  into 
existence  a  class  which  finds  its  profit  in  promoting 
wastefulness  and  extravagance  in  public  affairs.  Finally, 
any  tax  is  bad,  which  makes  the  real  taxpayer  pay  it  twice 
over,  while  the  government  receives  it  but  once. 


. 


CHAPTER  II. 
CROOKED  TAXATION. 

§  I.  Faults  of  existing  system.  The  system  of  taxa- 
tion most  in  use,  in  all  civilized  countries  to-day,  has  all 
these  faults. 

The  taxes  under  this  system  are  always  paid  to  the 
government  by  persons  who  are  authorized  and  expected 
to  recover  the  amount  from  some  one  else,  with  interest 
and  a  profit,  upon  which  the  law  places  no  limit. 

No  one  can  ever  tell  the  precise  amount  actually  con- 
tributed by  any  one  person,  under  this  system,  to  the  sup- 
port of  government. 

No  one  can  tell  how  much  of  the  money  paid  by  the 
final  taxpayer  goes  to  the  support  of  the  government,  or 
how  much  goes  into  the  private  purses  of  individuals. 

A  large  portion  of  the  final  tax-burden  is  invariably  per- 
verted to  private  use;  while,  in  many  cases,  nine  tenths 
and  even  nineteen  twentieths  are  thus  perverted. 

Private  property  is  thus  forcibly  taken  for  private  use ; 
an  operation  which  every  court  in  civilized  countries 
declares  in  so  many  words  to  be  "  robbery,  under  the 
forms  of  law." 

The  amount  of  the  tax  has  only  a  remote  connection 
with  the  actual  needs  or  expenses  of  government.  It  may 
be  and  the  fact  has  been,  in  several  countries,  for  ten  or 
twenty  years  together,  either  much  more  or  much  less 

1  U.  S.  Supreme  Court,  Loan  Asso.  v.  Topeka,  20  Wallace,  655. 

6 


CROOKED  TAXATION.  J 

than  the  government  needed.  Where  this  is  the  sole 
method  of  taxation,  taxpayers  often  pay  a  lighter  tax,  for 
years  together,  under  an  extravagant  and  even  corrupt 
government,  than  they  pay  under  one  rigorously  econom- 
ical and  honest.  This  is  no  accident ;  it  is  inherent  in  the 
system. 

The  pressure  of  such  taxation,  therefore,  has  almost  no 
effect  in  educating  the  people  to  demand  or  appreciate 
good  government. 

The  more  wisely  and  honestly  such  a  system  is  admin- 
istered, the  more  popular  does  it  make  public  extravagance 
and  the  more  unpopular  public  economy. 

§  2.  Profits  of  crooked  taxation.  Under  such  a  sys- 
tem, a  few  persons  make  large  profits ;  and  they  easily 
concentrate  their  power  to  perpetuate  and  extend  it,  in 
such  ways  as  more  and  more  to  diminish  the  proportion  of 
revenue  which  goes  to  the  public  use  and  to  increase  the 
proportion  in  which  it  is  diverted  to  private  use. 

Under  such  a  system,  the  persons  who  thus  profit  by 
what  all  courts  of  justice  describe  as  "  robbery,  under  the 
forms  of  law,"  acquire  "  vested  interests  "  ;  interference 
with  which  is  regarded,  by  multitudes  of  honest  and  un- 
selfish men,  as  something  positively  wicked. 

Thus,  as  a  necessary  result  of  this  system,  the  right  to 
live  by  robbery  grows  to  be  not  merely  equal  but  even 
superior  to  the  right  to  live  by  labor.  For  the  right  of 
labor  is  not  recognized  by  law  or  public  opinion  ;  while 
the  right  of  robbery  is. 

Under  this  system,  honest  men  are  often  forced  to 
abandon  honest  labor,  and  to  live  upon  legalized  robbery. 
At  first,  this  application  of  force  is  merely  accidental ; 
but  eventually  it  is  intentional  and  deliberate.  It  has 
been  intentionally  thus  applied  for  a  century,  in  America, 
and  for  at  least  two  centuries  in  Europe. 


8  NATURAL    TAXATION. 

§  3.  Taxation  of  poverty.  The  whole  burden  of  such 
taxes  rests  upon  consumption  and  not  at  all  upon  wealth. 
The  system  absolutely  exempts  property  from  the  sup- 
port of  government,  and  draws  taxes  only  from  those 
who  have  to  spend,  in  proportion  to  their  expenses. 

Inasmuch  as  the  necessary  expenses  of  the  very  poor 
are  a  hundred  times  as  large,  in  proportion  to  their  wealth, 
as  the  necessary  expenses  of  the  very  rich,  these  taxes 
bear  with  a  hundred-fold  severity  upon  the  very  poor,  as 
compared  with  the  very  rich. 

Averaging  all  classes  of  society  under  this  system,  the 
poor,  as  a  class,  invariably  pay  more  than  ten  times  their 
proper  share  of  taxes  ;  while  the  rich  pay  much  less  than 
one  tenth  of  their  proper  share. 

In  addition  to  this,  the  system  generally,  though  not 
invariably,  adds  to  the  cost  of  supporting  the  government 
a  private  profit,  so  large  as  to  far  exceed  the  whole  amount 
of  taxes  paid  by  the  rich  as  a  class. 

The  whole  of  this  private  profit  goes  to  a  portion  of  the 
richer  class  ;  thus  exempting  them,  as  a  class,  from  all  tax- 
ation, and  giving  them  a  larger  net  profit-  from  the  very 
fact  of  taxation. 

This  system,  therefore,  perpetually  adds  to  the  natural 
savings  of  the  rich  ;  while  it  almost  swallows  up  the  natu- 
ral savings  of  the  poor. 

The  tendency  of  this  method  of  taxation  is,  therefore  : 

1.  To  make  the  rich  richer,  and  the  poor  poorer  ; 

2.  To  shift  the  burden  of  taxation  from  those  best  able 
to  bear  it  to  those  least  able  ; 

3.  To  remove  all  checks  upon  the  extravagance  of  gov- 
ernment, by  making  the  only  persons  who  know  that  they 
pay  taxes  indifferent  as  to  the  amount   of  taxes,  if  not 
actually  interested  in  maintaining  needless  taxes,  for  the 
sake  of  a  profit  upon  their  collection  • 


CROOKED    TAXATION.  9 

4.  To  force  into  existence  a  class  of  wealthy  men,  whose 
income  depends  upon  legalized  robbery  ; 

5.  To  complicate  the  business  of  the  country  with  tax- 
ation, so  that  enormous  burdens  are  kept  upon  the  people, 
for  fear  that    "  vested  interests  "  will  suffer  if  these  bur- 
dens are  lightened  ; 

6.  To  promote   bribery  and    corruption,   by    making 
business  profits  directly  dependent  upon  political  action. 

§  4.  Crookedness  of  the  system.  A  system  of  taxa- 
tion which  invariably  produces  such  results  is  fitly  de- 
scribed by  the  name  of  Crooked  Taxation. 

It  is  crooked  in  its  operation,  crooked  in  its  form, 
crooked  in  its  motives,  crooked  in  its  aims,  crooked  in  its 
effects,  and,  as  fits  a  system  inherently  crooked,  it  is 
especially  crooked  in  its  influence  upon  the  well-being  of 
society. 

It  is  not  merely  indirect.  A  curve  is  indirect.  A  right 
angle  is  indirect.  Yet  each  is  regular  in  its  form  and  leads 
to  results  which  can  be  clearly  foreseen  and  which  are 
frankly  acknowledged.  But  so-called  indirect  taxation  is 
never  uniform  in  rates  or  operation.  It  never  proceeds 
upon  any  fixed  line,  whether  straight  or  curved.  It  never 
arrives  at  the  point  which  is  its  professed  aim,  and  it  is 
never  meant  to  arrive  there  by  those  who  control  it.  It 
never  produces  the  chief  results  which  are  expected  from 
it,  even  by  its  inventors,  and  never  produces  any  of  the 
results  which  they  publicly  profess  to  expect  from  it,  ex- 
cept in  rare  cases,  in  which  their  secret  calculations  are 
entirely  at  fault.  Its  line  of  working  is  pulled  up  and 
down  by  selfish  interests,  at  a  thousand  points,  until  it  be- 
comes so  hopelessly  crooked  that  nothing  short  of  omni- 
science can  foresee  its  results.  It  gives  rise  to  endless 
frauds,  and  every  effort  to  repress  these  frauds  involves 
some  new  oppression  upon  the  honest  and  the  poor.  In- 


IO  NATURAL    TAXATION. 

vented  originally  to  enable  governors  to  defraud  the  peo- 
ple, it  has  no  political  support,  except  the  desire  of  the 
governing  class  to  deceive  the  taxpayer  as  to  the  cost  of 
government,  the  desire  of  the  governed  to  evade  their 
just  share  of  taxation,  and  the  determination  of  a  small 
section  of  the  people  to  use  it  as  a  means  of  plundering 
all  the  rest.  Undoubtedly,  a  few  doctrinaires  sincerely 
advocate  this  system,  from  honest  motives ;  but  their 
support  counts  for  absolutely  nothing,  except  as  a  con- 
venient excuse  in  the  mouths  of  those  who  have  selfish 
reasons  for  quoting  them. 

It  is  doubtless  time  to  verify  these  broad  assertions,  for 
the  benefit  of  those  who  have  not  studied  the  question. 
No  one  who  has  studied  it,  with  care  and  ordinary  intelli- 
gence, since  the  days  of  the  man  who  cynically  declared 
that  the  supreme  art  of  taxation  was  to  pluck  the  greatest 
amount  of  feathers  with  the  least  amount  of  squalling, 
can  have  failed  to  see  most  of  these  things  for  himself. 
The  only  justification  which  any  honest,  intelligent  man 
has  ever  offered  for  crooked  taxation  is  either:  (i)  that 
government  must  be  maintained,  and  the  people  will 
not  submit  to  straightforward  taxation  for  its  mainte- 
nance ;  or  (2)  that  every  form  of  taxation  is  equally 
oppressive  and  demoralizing  in  its  effects. 

Crooked  taxation  assumes  a  great  variety  of  forms  ; 
but  it  is  most  familiar  under  the  names  of  tariffs  and  ex- 
cise taxes.  It  will  simplify  the  discussion  to  confine 
illustration  to  these  forms,  although  they  are  not  the  only 
ones.  At  the  outset,  let  us  take  the  duty  on  sugar,  as  it 
was  maintained  until  1890,  and  the  tax  on  whisky,  which 
is  still  supported  by  a  majority  of  both  our  political  par- 
ties. The  one  is  a  necessity,  the  other  (except  for  manu- 
facturing use)  a  luxury  ;  and  thus  the  two  illustrate  those 
two  sides  of  the  question. 


CROOKED    TAXATION.  II 

§  5.  Taxes  upon  sugar  and  whisky.  The  tax  upon 
foreign  sugar  is  admittedly  paid  by  our  own  people.  For 
many  years  it  averaged  70  per  cent,  of  the  cost,  and 
amounted  to  nearly  $60,000,000  per  annum.  In  addi- 
tion to  this,  about  180,000  tons  were  annually  produced 
at  home,  the  price  of  which  to  the  consumer  was  increased 
by  at  least  two  cents  a  pound  by  the  tariff,  or  about  $S,- 
000,000  in  all.  Either  the  whole  of  this  $8,000,000  went 
into  the  pockets  of  a  few  sugar-planters,  or,  which  is  more 
probable,  they  only  gained  half  of  it,  while  the  other  half 
was  wasted  in  misapplied  human  effort.  The  effect  of 
crooked  taxation,  in  this  instance,  was  probably  to  provide 
$60,000,000  annually  for  public  use,  and,  by  incidental 
"  robbery  under  the  forms  of  law,"  to  seize  $4,000,000  of 
private  property  for  private  use  and  $4,000,000  more  for 
no  use  at  all,  absolutely  destroying  it  by  putting  it  into 
labor  as  grossly  misapplied  as  would  be  carrying  bricks  to 
sea  and  dropping  them  in  the  ocean. 

The  correctness  of  these  figures  and  inferences  will  no 
doubt  be  vehemently  disputed.  But  none  of  the  disputants 
will  be  able  to  furnish  figures  any  more  correct ;  and  thus 
the  truth  of  the  next  proposition  will  be  proved,  to  wit,  that 
no  one  can  tell  how  much  of  these  taxes  goes  to  the  state, 
how  much  to  private  pockets,  and  how  much  to  pure  waste. 

But  this  is  a  mere  beginning.  By  one  of  those  innu- 
merable breaks  in  the  wriggling  line  of  crooked  taxation, 
which  are  made  on  purpose  to  deceive  and  defraud  the 
people,  the  sugar  tax  was  suddenly  raised  to  a  prohibitory 
point  on  all  sugar  fit  to  eat.  Thus  our  refiners  were  given 
an  absolute  monopoly  ;  and  the  whole  tax  on  eatable 
sugar,  as  distinguished  from  the  crude  article,  was  levied 
for  the  sole  benefit  of  the  Sugar  Trust, — another  instance 
of  unqualified  robbery  under  the  forms  of  law,  without  a 
shred  of  pretence  of  government  revenue. 


12  NATURAL    TAXATION. 

These  exactions,  amounting  to  over  $75,000,000  per 
annum,  did  not  end  here.  The  jobbers  and  retailers  must 
collect  an  increase  from  their,  customers,  to  pay  for  inter- 
est on  their  advances  and  usual  profits  ;  all  of  which  must 
be  paid  by  the  consumers  of  sugar. 

Who  are  these  consumers  ?  And  how  is  this  vast  burden 
apportioned  among  the  people?  Every  family  consumes 
sugar.  In  what  proportion  ?  According  to  their  wealth 
or  their  income  ?  These  considerations  have  only  a  slight 
influence.  A  family  worth  only  $5,000  will  generally  con- 
sume as  much  sugar  as  one  worth  $100,000  ;  and  frequently 
such  a  family  will  consume  more  than  a  family  worth 
$10,000,000.  We  all  know  instances  in  which  this  is  true. 
To  say  that  the  poor  pay  ten  times  as  much  of  the  sugar 
tax  as  the  rich,  in  proportion  to  their  respective  accumula- 
tions, is  an  absurdly  low  estimate  of  the  truth.  The  very 
poor  pay  ten  thousand  times  as  much,  in  proportion,  as 
the  very  rich. 

The  last  consideration  applies  equally  to  the  tax  on 
domestic  whisky.  The  tax  is  collected,  with  a  large  profit, 
from  consumers ;  and  whisky  is  consumecl  in  far  greater 
quantities  by  the  poor  than  by  the  rich ;  so  that  on  this, 
also,  the  poor  are  taxed  out  of  all  proportion  to  the  rich ; 
while  dealers,  who  are  rich,  as  compared  with  the  vast 
majority  of  our  people,  make  a  large  profit  upon  the 
taxes,  which  they  first  pay  but  immediately  collect  from 
their  customers.1 

1  It  is  often  said  that  a  tax  on  whisky  is  purely  voluntary,  and  that  it 
should  not  be  regarded  as  a  burden  upon  the  poor,  since  they  can  escape  it 
by  practising  abstinence.  But  this  is  a  palpable  fallacy.  So  long  as  indirect 
taxation  is  maintained,  the  masses  must  pay  the  bulk  of  it ;  because  the  rich 
never  are  numerous  enough  to  pay,  in  taxes  upon  their  consumption,  one 
fourth  of  the  needful  revenue.  In  actual  fact,  they  do  not  pay  one  tenth  of 
it  If  then  the  American  masses  should  renounce  liquors  and  tobacco,  as 
they  do  largely  in  Italy,  and  absolutely  in  India,  they  would  be  taxed  just 
as  heavily  upon  their  bread  and  salt,  as  the  Italians  and  Indians  are 


CROOKED    TAXATION.  13 

Will  any  one  pretend  that  those  who  ultimately  pay 
these  enormous  taxes  upon  sugar  and  whisky  have  any 
idea  of  the  amount  which  they  contribute  to  the  support 
of  the  government?  Does  the  payment  of  such  taxes 
have  the  smallest  tendency  to  excite  in  the  real  taxpay- 
ers an  interest  in  honest  and  economical  government  ? 
Are  not  such  taxes  devised  for  the  precise  and  avowed 
purpose  of  preventing  the  mass  of  voters  from  feeling  the 
burden  and  becoming  restive  under  it  ?  Was  there  ever 
any  motive  for  originally  levying  these  taxes,  other  than 
the  desire  to  blind  the  people  to  the  cost  of  govern- 
ment, and  to  obtain  money  from  them  without  their 
real  consent  ?  Is  there  any  other  good  reason  for 
maintaining  a  tariff  for  revenue  only  or  an  internal  excise 
tax? 

§  6.  Impossibility  of  economical  government  under 
crooked  taxation. — Can  such  taxes  be  so  levied,  under 
the  most  honest  administration,  as  to  be  "  limited  to  the 
needs  of  government,  economically  administered  ?  "  The 
needs  of  government,  thus  defined,  will  often  rise  $40,- 
000,000  in  one  year  and  fall  $30,000,000  in  the  next. 
Suppose  the  entire  revenue  to  be  derived  from  sugar  and 
whisky,  which  will  serve  just  as  well  as  to  refer  to  a  thou- 
sand similar  taxes  now  existing.  Suppose  the  govern- 
ment to  require  an  increase  of  $40,000,000  in  its  revenue. 
Shall  the  taxes  on  these  articles  be  instantly  increased  by 
$20,000,000  each  ?  Such  things  have  been  done ;  but 
with  what  result  ?  Speculators  learn  that  the  increase  is 
to  be  made ;  they  use  corrupt  means  to  secure  such  an 
increase  as  will  insure  profits  to  them  ;  and  they  make 
gigantic  fortunes  at  the  expense  of  the  poor,  who  cannot 
buy  more  than  their  daily  needs.  With  irony,  all  the 
more  bitter  because  it  was  so  unconscious,  our  simple- 
minded  "  second  Franklin  "  used  to  ask  why  farmers, 


14  NATURAL    TAXATION. 

clerks,  and  day-laborers,  who  objected  to  a  tax  on  pig- 
iron,  did  not  forthwith  build  hundred-thousand-dollar 
furnaces,  so  as  to  participate  in  the  profits  of  iron-making. 
And  perhaps  some  other  philosopher  may  ask  why  sewing- 
women  do  not  buy  sugar  by  the  ton,  at  low  prices,  to  feed 
their  children. 

Not  only  would  speculators  profit  by  such  advances  in 
taxation,  but  no  human  wisdom  would  suffice  to  measure 
even  approximately  the  advance  which  ought  to  be  made 
in  order  to  produce  the  needed  revenue.  No  estimate 
would  come  within  $5,000,000  of  the  actual  result.  Con- 
sumption might  be  reduced  so  much,  by  the  increased 
cost,  as  to  make  a  higher  tax  produce  a  smaller  revenue. 
This  has  happened  in  cases  without  number.  Or,  in  the 
effort  to  allow  for  this,  the  revenue  might  be  increased  to 
an  excessive  amount. 

§  7.  Difficulty  of  reducing  crooked  taxes.  Take  the 
case  of  a  needed  reduction  of  revenue.  Did  we  not 
struggle  with  this  problem  for  twenty  years  ?  Do  we 
need  any  illustrations  of  the  almost  insuperable  diffi- 
culties of  reducing  crooked  taxes?  Vested  interests  have 
sprung  up.  Large  investments  have  been  made,  upon 
the  expectation  that  the  inequalities  of  crooked  taxation 
would  be  maintained  indefinitely.  Reduction  of  taxes 
means  ruin  to  a  few  wealthy  men.  In  1807,  a^  New 
England  raged  against  the  embargo  and  non-intercourse 
acts.  But,  when  they  were  forced  on  New  England  by 
the  South,  New  England  merchants  turned  into  manu- 
facturers, and  made  the  South  pay  heavy  tribute.  When 
the  absurd  embargo  was  repealed,  the  South  supposed 
that  it  would  do  a  favor  to  New  England  by  repealing 
the  non-intercourse  acts  also  ;  but,  to  the  astonishment  of 
short-sighted  politicians,  this  repeal  was  defeated  by  New 
England  votes,  controlled  by  the  new  manufacturing 


CROOKED    TAXATION.  15 

class.  The  South  forced  New  England  into  an  abnormal 
development  of  manufactures  ;  and  it  has  paid  heavily  for 
its  folly,  for  eighty  years  since. 

It  is  impossible  thus  to  trifle  with  vast  business  inter- 
ests. After  crooked  taxation  has  forced  capital  to  seek 
its  profits  out  of  legalized  plunder,  those  who  have  been 
driven  by  legislation  to  seek  profit  in  this  way  will  fight 
to  the  death  to  maintain  the  taxes  through  which  they 
live.  They  are  not  to  be  blamed,  any  more  than  a  Turk- 
ish pasha  is  to  be  blamed  for  extortion,  when  his  master 
gives  him  only  the  choice  between  living  by  extortion  or 
dying  by  the  bowstring. 

Again,  it  is  impossible  to  tell  beforehand  what  will  be 
the  effect  of  a  reduction  of  crooked  taxation.  A  very 
'-heavy  reduction  of  the  tariff  in  1846  produced  a  large  in- 
crease of  revenue.  But  a  much  smaller  reduction  in  1857 
produced  a  permanent  deficit  in  revenue.  Judicial  cor- 
rections of  treasury  rulings,  reducing  duties  upon  steel 
blooms  at  one  time,  and  upon  steel  wire  at  another  time, 
increased  the  revenue  upon  each  of  these  articles,  from  a 
few  hundred  dollars  to  about  two  millions.  Crooked 
taxes  are  like  crooked  rifles ;  the  only  thing  of  which  you 
can  be  sure  is  that  they  will  not  produce  the  effect  which 
you  expect  of  them. 

The  result  is  that  crooked  taxes  forever  produce  either 
a  great  deal  too  much  or  a  great  deal  too  little.  And  as 
no  government  can  go  on  under  a  perpetual  deficiency, 
every  government,  which  depends  entirely  upon  crooked 
taxation,  keeps  up  excessive  taxes  and  surplus  revenues, 
with  the  inevitable  consequences — extravagance,  waste, 
and  corruption.  The  total  abolition  of  protective  duties 
would  make  no  difference  upon  this  point.  Public  waste 
and  corruption  are  the  necessary  results  of  exclusive  de- 
pendence upon  crooked  taxation. 


1 6  NATURAL    TAXATION. 

§  8.  Political  corruption.  Crooked  taxation  offers 
such  inducements  to  bribery  and  other  forms  of  political 
corruption  as  to  make  them  almost  inevitable.  What- 
ever may  be  the  fact  in  other  countries,  experience  proves 
that,  in  America,  at  all  events,  such  corruption  is  an  in- 
variable attendant  of  such  taxation. 

In  the  United  States,  this  fact  is  not  merely  admitted 
by  all  political  parties  :  it  is  positively  charged  by  each  of 
them  in  all  their  leading  organs  of  opinion,  by  all  of  their 
orators  in  election  campaigns,  and  by  most  of  their  lead- 
ing statesmen.  The  Republican  National  Convention  of 
1888  distinctly  charged  that  the  proposed  Democratic  re- 
vision of  the  tariff  was  dictated  by  the  Whisky  Trust. 
Every  Republican  State  convention,  every  Republican 
newspaper  and  every  Republican  orator  declared  that 
the  Democratic  tariff  of  1894  was  dictated  by  the  Sugar 
Trust  and  carried  through  Congress  by  actual  bribery. 
It  is  an  article  of  faith,  with  almost  every  American  pro- 
tectionist, that  all  efforts  for  reduction  in  protective  duties 
are  paid  for  with  British  gold.  On  the  other  hand,  every 
Democratic  convention,  newspaper  and  orator  asserted 
continuously,  from  1888  onwards,  that  the  Republican 
victories  of  1880  and  1888  were  secured  by  open  and 
flagrant  bribery  of  voters  upon  an  enormous  scale,  and 
that  the  protectionist  tariffs  of  1883  and  1890  were  car- 
ried through  Congress  by  the  expenditure,  in  each  case, 
of  over  two  million  dollars,  mostly  in  purchasing  the  elec- 
tion of  Congressmen,  but  partly  in  influencing  Congress 
itself.  The  third  party  has  always  believed  that  both 
parties  were  thus  corrupted. 

§  9.  Evidence  of  corruption.  Some  of  the  most  im- 
portant of  these  accusations  are  unquestionably  true  ; 
for  they  have  been  admitted  by  the  very  parties  ac- 
cused. In  December,  1880,  the  Vice-President-elect, 


CROOKED    TAXATION.  \J 

at  a  public  dinner  given  in  honor  of  one  of  the 
most  notorious  corruptionists  in  the  country,  declared, 
amid  laughter  and  cheers,  that  the  guest  of  the  even- 
ing had  carried  the  decisive  State  of  Indiana  by  the 
liberal  use  of  "  soap  " — a  slang  phrase  well  understood  by 
all  to  mean  bribes  to  voters.  In  1888  the  same  State  was 
again  carried  by  such  open  and  admitted  bribery,  under 
written  instructions  from  a  person  who  formerly  held  a 
high  public  office,  that  the  very  President,  who  owed  the 
vote  of  his  State  to  the  management  of  this  official,  re- 
fused to  have  anything  further  to  do  with  him.  On  the 
other  hand,  the  charge  of  bribery  with  respect  to  the  final 
form  of  the  tariff  of  1894,  passed  by  a  Democratic  Con- 
gress, was  made  as.  vigorously  by  Democrats  as  by  Re- 
publicans ;  and  the  only  plea  of  justificatiou  ever  made 
by  the  small  section  of  the  party  accused  was  that  the 
bribe  had  been  paid  before  the  election  of  Congress,  in 
order  to  help  its  election,  and  that  nothing  had  been  paid 
to  individual  Congressmen  since  the  election. 

Whatever  moral  difference  there  may  be  between  the 
bribery  of  Congressmen  and  the  bribery  of  their  electors, 
it  is  clear  that  the  injury  to  the  community,  in  the  result 
upon  its  business  interests,  is  equally  serious  in  either 
case,  while  the  general  effect  of  buying  electors  is  worse 
than  that  of  buying  Congressmen.  It  is  probable  that 
the  votes  of  Congressmen  upon  the  final  passage  of  a 
tariff  bill  are  rarely  purchased,  but  it  is  still  more  proba- 
ble that  many  votes  upon  details  of  a  bill  are  purchased. 
Of  course,  legal  evidence  of  such  facts  is  almost  impossi- 
ble to  be  had,  but  evidence  entirely  satisfactory  to  reason- 
able minds  has  been  obtained  as  to  Congressional  votes, 
both  for  and  against  tariff  changes. 

Nor  is  such  corruption  by  any  means  confined  to  tariff 
legislation.  There  is  far  more  evidence  of  Congressional 


1 8  NATURAL    TAXATION. 

corruption  in  connection  with  the  whisky  tax  than  in 
connection  with  any  tariff.  The  frequent  and  sudden  in- 
creases of  the  tax  on  whisky  between  1862  and  1866 
were  notoriously  accompanied  by  large  speculations  in 
whisky,  carried  for  the  account  of  Congressmen  by  the 
whisky  ring,  and  amounting  to  direct  and  gross  bribery. 
The  last  increase  of  twenty  cents  in  this  tax,  made  in 
1894,  has  been  followed  by  an  official  exposure  of  the 
Whisky  Trust  accounts,  showing  an  expenditure  of 
$600,000  for  "  statistics  "  and  $500,000  for  "  extraordinary 
legal  expenses,"  most  of  which,  it  is  admitted,  was  made 
in  corrupting  Congress  into  the  old  trick  of  increasing  the 
tax,  while  exempting  whisky  on  hand.  The  fact  that 
this  enormous  expenditure  was  not  rewarded  by  full  suc- 
cess suggests  the  amount  which  must  have  been  spent  on 
former  occasions,  when  such  success  was  obtained. 

§10.  Iniquitous  methods  of  collection.  The  methods 
by  which  nearly  all  crooked  taxes  are  collected  are  always 
and  everywhere  iniquitous  and  disgraceful.  Perhaps  we 
ought  to  say  that  the  methods  by  which  the  amount  to 
be  collected  is  ascertained  are  iniquitous,  -rather  than  the 
mere  final  act  of  collection.  Any  gentleman  can,  without 
a  stain  upon  his  character,  use  such  force  as  the  law  may 
direct,  to  seize  property,  forfeited  for  non-payment  of 
taxes.  But  no  true  gentleman  can  go  through  all  the 
details  of  the  work  required  by  law  and  necessity,  to 
ascertain  the  amount  which  ought  to  be  collected  under 
most  forms  of  crooked  taxation.  And  although  a  very 
large  number  of  true  gentlemen  do  administer  the  existing 
tax  laws,  without  doing  anything  unworthy  of  their  repu- 
tation, their  administration  is  attended  with  greater  injus- 
tice to  the  poor  and  the  honest  taxpayers  than  is  that 
part  of  the  administration  which  is  entrusted  to  unscrupu- 
lous and  brutal  officials. 


CROOKED    TAXATION.  1 9 

§  II.  Collection  of  excise  taxes.  Take  what  are 
usually  called  internal-revenue  taxes,  but  which  are  more 
correctly  termed  excise  taxes,  as  an  illustration.  It  is 
impossible  to  administer  the  laws  imposing  these  taxes, 
without  the  constant  aid  of  spies,  sudden  searches  of 
private  premises,  seizures  of  property,  upon  the  slightest 
pretext,  continual  arrests  upon  suspicion,  and  enormous 
penalties  for  slight  offences  and  even  for  honest  mis- 
takes. The  punishment  visited  upon  a  land-owner, 
who  suffers  his  land  to  be  used  for  making  one  gallon 
of  illicit  whisky  is  literally  a  thousand  times  more 
severe  than  can  be  imposed  upon  him  for  suffering  the 
land  to  be  used  as  a  haunt  of  highway  robbers.  The 
punishment  prescribed  by  law  and  inflicted  in  fact  for 
making  the  gallon  of  whisky  is  far  more  severe  than  the 
punishment  ever  imposed  for  atrocious  acts  of  violence, 
not  reaching  the  dignity  of  actual  attempts  to  kill.  In 
England,  thousands  of  brutes  have  dashed  their  wives  or 
mothers  against  walls  or  tables,  breaking  several  ribs  ;  not 
one  of  whom  was  ever  punished  with  one  fourth  of  the 
seventy  shown  to  the  maker  of  illicit  candles. 

It  is  not  surprising  that,  for  more  than  a  century  after 
excise  taxes  became  general  in  England,  so  that  not  only 
liquors,  but  also  leather,  glass,  candles,  bricks,  and  in- 
numerable other  articles  could  only  be  manufactured 
under  the  rigid  espionage  of  public  officers,  the  very  name 
of  "  exciseman  "  became  an  object  of  universal  hatred 
and  contempt.  It  is  not  surprising  that,  in  the  mountain 
regions  of  the  South,  where  a  little  whisky  would  naturally 
be  made  on  every  farm,  the  exciseman  is  generally  hated, 
although  too  powerful  and  courageous  to  be  despised. 

§  12.  Collection  of  tariff  duties.  Tariffs  on  imported 
goods  are  administered  on  similar  principles.  Every 
person  arriving  at  our  ports  must  submit  to  an  ex- 


20  NATURAL    TAXATION. 

amination  of  his  baggage,  such  as  he  would  think 
degrading  and  intolerable  if  made  by  a  city  assessor. 
Ladies'  dresses  and  underclothing  are  dragged  out  and 
spread  upon  the  wharf  for  the  inspection  of  a  coarse  crowd 
of,  dock  laborers.  A  "faithful  officer"  searches  them 
carefully,  to  see  if  they  are  sufficiently  dirty  to  warrant 
the  belief  that  they  are  in  "  actual  use."  The  late  Mrs. 
William  Waldorf  Astor  (honor  to  her  memory  !)  was  the 
first  woman  who  rebelled  against  this  abominable  practice 
and  refused  to  pay  a  tax  upon  cleanliness.  She  success- 
fully appealed  to  the  Supreme  Court  against  this  disgust- 
ing standard  of  taxable  character ;  but  the  outrage  is  still 
repeated,  ten  thousand  times  a  year,  by  vigilant  officers, 
who  peer  and  pry  into  women's  clothing  and  insist  that  it 
must  be  new,  because  it  is  not  filthy. 

On  the  slightest  suspicion  that  a  passenger  has  con- 
cealed dutiable  goods,  the  law  gives  absolute  power  to  the 
customs  officers  to  strip  the  suspected  person  naked  ;  and 
this  power  is  habitually  exercised.  There  is  enough  sense  of 
decency  in  our  officials  to  assign  women  to  tire  duty  of  strip- 
ping women ;  but  imagine  the  shame  and  torture  which 
even  such  a  search  must  inflict  upon  a  sensitive  and  innocent 
woman.  Of  course,  the  customs  officers  would,  with  one 
voice,  declare  that  no  innocent  woman  was  ever  subjected 
to  such  an  outrage  ;  but  such  a  statement  is  an  insult  to 
our  common-sense.  The  mere  fact  that  no  woman  has 
brought  suit  for  damages  on  this  account  proves  nothing. 
Few  sensitive  women  would  endure  the  added  shame  of 
relating  their  story  in  court ;  and  as  none  of  them  could 
prove  malice  on  the  part  of  the  searcher,  no  sensible  law- 
yer would  advise  them  to  sue.  The  malice  is  in  the  law, 
not  in  the  officers. 

The  oppressions  which  have  been  practised  upon  mil- 
lions of  poor  immigrants  arriving  in  the  United  States 


CROOKED    TAXATION.  21 

have  never  been  even  faintly  described.  For  many  years 
it  was  the  uniform  practice  to  make  them  pay  enormous 
taxes  upon  every  article,  however  trifling,  which  they  had 
not  actually  used  and  soiled.  Cases  are  well  known  in 
which  a  poor  woman,  who  had  only  one  pair  of  stockings 
(which  she  kept  clean  for  landing,  going  barefoot  on  the 
ship,)  was  taxed  80  per  cent,  on  this  pair ;  and  men,  hav- 
ing only  two  suits  of  clothing,  have  been  taxed  upon  one 
suit  for  more  than  it  cost.  Nine  officers  reported  their 
names  for  honorable  mention,  on  their  joint  seizure  of  two 
yards  of  flannel,  which  a  poor  Irish  woman  had  kept  clean 
until  her  arrival.  These  are  but  small  instances  of  vast 
numbers  of  similar  petty  and  contemptible  extortions, 
which  are  carried  on,  not  from  corrupt  motives,  but  in 
zeal  for  the  enforcement  of  crooked  taxation.  Is  it  possi- 
ble that  men  of  refinement  and  honor  can  administer  such 
regulations  without  degradation  ?  1 

1  While  these  pages  were  passing  through  the  press  the  following  item 
appeared  in  the  New  York  Evening  Post,  of  April  18,  1895. 

"  Washington,  April  18. — Accompanying  the  Treasury  decision  permitting 
ships  to  come  up  to  New  York  harbor  in  the  night  and  discharge  passengers' 
baggage  without  taking  out  a  special  permit  or  hiring  inspectors,  a  code  of 
instructions  for  inspectors  will  be  promulgated.  This  will  set  forth  in  plain 
terms  that  the  intent  of  the  law  is  to  break  up  smuggling  in  the  importation 
of  merchandise,  not  to  annoy  and  harass  the  honest  travelling  public. 

"  Several  cases  have  come  to  the  notice  of  the  department  recently  showing 
that  inspectors  often  mistake  their  duty  in  this  particular.  Within  one 
month,  three  women  who  had  been  travelling  abroad  and  brought  home  mil- 
linery for  their  own  use  were  pounced  upon  as  professional  dressmakers 
trying  to  smuggle  in  goods  for  sale  to  their  customers.  Two  of  the  accused 
were  able  to  prove  their  innocence  without  much  difficulty  ;  but  in  the  case 
of  the  third  certain  measurements  were  taken  which  convinced  the  inspectors 
that  the  gowns  found  in  her  trunks  could  not  be  hers,  as  they  would  not  fit 
her  figure.  At  her  own  suggestion,  therefore,  she  dressed  herself  in  the  sev- 
eral garments,  and  submitted  the  results  to  expert  judges  named  by  the 
collector,  who  promptly  decided  that  the  inspectors  were  in  error  and  sent 
her  home  in  triumph. 

"It  is  the  desire  of  the  present  administration  of  the  Treasury  to  break 
up  this  sort  of  thing." 


22  NATURAL    TAXATION. 

§  13.  Ad  valorem  taxes.  The  only  fair  method  of 
taxing  any  article  is  obviously  by  proportioning  the  tax 
to  its  value.  Taxes,  levied  in  strict  proportion  to  weight 
or  measure  only,  are  so  frightfully  unjust  to  the  poorer 
classes  that  no  one  attempts  to  justify  them,  except  on 
the  ground  of  necessity,  to  avoid  the  frauds  which  are 
common  under  the  ad  valorem  plan.  So  impracticable  is 
it  to  make  all  duties  specific,  that  under  the  McKinley 
tariff  itself,  which  was  framed  in  1890  by  fanatical  de- 
votees of  the  specific  system,  more  than  half  of  the  duties 
were  ad  valorem. 

But,  in  order  to  avoid  fraud  and  evasion  under  ad  va- 
lorem taxes,  the  government  is  compelled  to  employ  a 
small  army  of  spies,  to  resort  to  all  kinds  of  low  tricks  to 
ascertain  prices,  to  treat  all  merchants  as  thieves  and 
rogues,  to  require  detailed  statements  about  matters 
concerning  which  the  declarants  cannot  possibly  know 
anything,  to  impose  enormous  fines  and  penalties  for 
errors  which  may  be  fraudulent  or  may  be  perfectly  inno- 
cent, to  put  valuations  upon  goods  which  the  officials 
know  and  admit  to  be  utterly  false  and  excessive,  and  in 
general  to  adopt  methods  of  dealing  with  honest  tax- 
payers which  no  business  man  could  use  without  being 
expelled  from  all  decent  society.  Blackmail,  fraud, 
swindling,  and  enforced  lying  are  regular  methods  of 
collecting  the  tariff  revenue  of  the  United  States,  not 
through  the  fault  of  the  administrative  officers,  but  as  the 
necessary  result  of  deliberate  provisions  of  statute  law. 
These  words  do  but  express,  in  plain  English,  what  both 
Republican  and  Democratic  Secretaries  of  the  Treasury 
have  stated  in  the  decent  obscurity  of  many-syllabled 
words. 

§  14.  Crooked  taxation  widens  the  social  chasm. 
The  greatest  evil  resulting  from  such  taxes  remains  to 


CROOKED    TAXATION.  23 

be  considered.  This  is  their  effect  upon  the  distribution 
of  wealth,  by  making  the  rich  richer  and  the  poor  poorer 
than  they  would  be  under  direct  taxation. 

It  will  not  be  here  asserted  that  the  poor  are  growing 
absolutely  poorer.  Whether  true  or  false,  that  statement 
is  not  here  in  issue.  The  point  made  is  that  crooked 
taxation  makes  the  poor  poorer  than  they  would  be  under 
direct  taxation,  and  that  it  continually  widens  the  dis- 
parity between  the  rich  and  the  poor. 

Some  of  the  inevitable  incidents  of  such  a  system  tend 
strongly  in  this  direction.  The  intermingling  of  politics 
with  business  and  the  constant  interference  with  produc- 
tion and  consumption,  which  crooked  taxes  involve,  would 
alone  give  continual  opportunities  for  speculation,  of 
which  none  but  capitalists  can  ever  avail  themselves,  and 
from  which,  therefore,  none  but  capitalists  can  profit ; 
while  such  profits  are  made  chiefly  at  the  cost  of  the  poor. 
The  uncertainty  of  operation,  which  always  attaches  to 
these  taxes,  making  that  which  was  crooked  in  its  con- 
struction doubly  crooked  in  its  working,  opening  still 
larger  opportunities  to  speculators,  swells  yet  more  the 
profits  of  capitalists  at  the  expense  of  others.  Changes  in 
the  text  of  the  laws  providing  for  such  taxes  are  very  fre- 
quent ;  and  changes  of  interpretation  are  ten  times  as 
frequent.  Every  one  of  these  offers  to  a  few  shrewd 
capitalists  a  fine  harvest,  out  of  the  crops  of  the  poor. 
When  such  opportunities  for  profit  become  gradually 
infrequent,  the  class  accustomed  to  count  upon  them 
clamor  for  a  revision  of  the  law;  and,  no  matter  whether 
the  revision  is  upward  or  downward,  the  engrossing  clerks 
always  make  some  innocent  mistake,  which  is  worth  a 
million  dollars  at  least  to  some  lawyer,  who,  by  a  marvel- 
lous instinct,  discovers  the  mistake  almost  before  the  ink 
is  dry ;  while  fifty  new  elements  of  crookedness  are  intro- 


24  NATURAL    TAXATION. 

duced  by  sly  legislators,  which  escape  public  attention, 
until  another  set  of  capitalists  have  cleared  as  many 
million  dollars  out  of  the  "  accidental  inequalities  "  of 
taxation. 

These  characteristics  of  such  legislation  are  usually 
brought  up  in  controversies  over  the  issue  between  tariffs 
for  revenue  and  tariffs  for  protection  ;  but  in  reality  they 
have  little  to  do  with  that  issue.  They  are  inherent  in  all 
tariffs  and  in  all  taxes  upon  production  and  exchange. 
The  principal  reason  why  they  have  become  associated 
with  that  particular  controversy  is  that,  under  a  protec- 
tive tariff,  there  is  always  a  large  number  of  wealthy  and 
influential  people  who  can  be  induced  to  join  in  a  demand 
for  revision  ;  while,  under  a  tariff  for  revenue  only,  such  a 
demand  comes  only  from  the  few  who  profit  by  mere 
change,  unless  there  is  a  substantial  reason  for  it.  More- 
over, a  tariff  for  revenue  only  is,  for  reasons  not  necessary 
now  to  state,  a  practical  impossibility  in  any  country 
which  depends  for  its  revenue  upon  indirect  taxation  alone  ; 
and  therefore  the  United  States  have  never  had  any  ex- 
perience of  it. 

But  all  these  effects  of  crooked  taxation,  amounting, 
though  they  do,  to  many  millions,  annually  drawn  from 
the  poor  and  divided  among  a  few  of  the  rich,  are  insig- 
nificant, compared  with  two  other  influences  which  remain 
to  be  considered.  These  are:  (i)  the  levy  of  tribute  upon 
the  masses  for  the  direct  profit  of  a  few  wealthy  classes  ; 
and  (2)  the  enormous  taxation  of  the  poor  and  almost 
entire  exemption  of  the  rich. 

§  15.  Protective  taxes.  The  first  of  these  is  not  the 
most  important ;  and  it  is  one  concerning  which  there  is 
so  much  controversy,  that  it  will  be  only  briefly  mentioned 
here.  This  is  the  tribute  which  a  few  rich  men  are  enabled 
by  this  system  to  levy  upon  the  rest  of  the  community 


CROOKED    TAXATION.  2$ 

through  so-called  protective  taxes  upon  competing  prod- 
ucts. The  most  moderate  estimate  of  this  item  places  it  at 
three  times  the  amount  of  duties  actually  collected  by  the 
government  upon  such  products.  As  those  who  dispute 
this  estimate  assert  that  a  protective  tariff  imposes  no 
burden  at  all  upon  the  people  of  the  protected  country, 
but  that  Europe  pays  all  the  protective  taxes  of  America 
on  European  products,  while  America  pays  all  the  protec- 
tive taxes  of  Europe  on  American  products,  there  is  no 
advantage  in  offering  any  compromise  on  this  estimate. 
It  may  be  taken  as  it  is  or  rejected  altogether.  It  is  in- 
cluded in  the  computations  hereafter  given  ;  but  if  re- 
jected, it  would  not  reduce  the  estimate  of  the  effects  of 
indirect  taxation  by  so  much  as  one  half. 

But  the  justice  of  allowing,  in  these  calculations,  for  an 
addition  to  the  cost  of  domestic  productions  to  the  con- 
sumer of  fully  three  times  the  amount  of  all  duties  col- 
lected, is  demonstrated  in  an  appendix  to  the  recent 
work  of  David  A.  Wells  on  Economic  Changes,  page  472. 
There  can  be  no  impropriety  in  saying  that  this  appendix 
was  not  written  by  Mr.  Wells,  but  is  the  work  of  a  gen- 
tleman of  unusual  ability  and  experience  in  statistical 
fields,  who  is  also  much  more  conservative  in  his  views 
than  Mr.  Wells.  This  appendix  shows  that  the  people 
of  the  United  States  have  actually  paid  an  average  price 
for  iron  and  steel,  during  ten  years,  ending  in  1887,  of 
$56,000,000  per  annum  in  excesss  of  the  average  English 
price ;  while  the  official  statistics  show  that  the  average 
revenue  to  the  United  States  from  duties  on  all  iron  and 
steel,  during  the  same  period,  was  less  than  $15,000,000 
per  annum.  This  shows  an  addition  to  the  cost  to  the 
consumer  of  three  and  two  thirds  of  the  whole  duty  col- 
lected. But  this  is  not  all.  Tin  plates  are  included  in 
the  dutiable  articles.  No  tin  plates  were  produced  here 


26  NATURAL    TAXATION. 

during  those  ten  years ;  and  therefore  the  increased  cost 
of  American  production  relates  solely  to  other  forms  of 
iron  products.  Excluding  these,  the  revenue  from  iron 
and  steel  has  averaged  less  than  $12,000,000  per  annum, 
during  the  period  referred  to.  The  consumer  has,  there- 
fore, paid  over  four  and  one  half  times  as  much  as  the  duty 
in  addition  thereto. 

§  16.  Excise  taxes.  The  amount  which  should  be  al- 
lowed for  the  effect  of  internal  taxes  upon  domestic  pro- 
duction is  much  more  difficult  to  estimate.  That  such 
taxes  do  increase  the  cost  to  the  consumer,  far  in  excess 
of  the  mere  tax  paid  to  the  state,  is  very  clear.  The  his- 
tory of  the  match  tax  alone  is  sufficient  to  prove  this. 
Levied  solely  for  revenue,  it  soon  ruined  all  small  manu- 
facturers and  created  a  monopoly,  which  increased  the 
price,  not  only  by  the  one  cent  per  box  paid  to  the  gov- 
ernment, but  by  another  cent ;  as  was  proved  by  the  fact 
that  the  cost  to  consumers  fell  two  cents  soon  after  the 
repeal  of  the  one-cent  tax.  And,  for  nearly  two  years 
after  the  tax  was  laid,  this  whole  increase  went  into  private 
pockets ;  the  market  being  fully  stocked,  in  anticipation 
of  the  tax.  But  it  is  not  probable  that  all  excise  taxes 
operate  quite  so  severely.  Their  influence  in  checking 
production,  however,  and  the  wholly  unforeseen  ways  in 
which  they  hinder  improvements  and  petrify  industry, 
to  the  common  loss,  are  well  known.  It  would  be  a 
moderate  estimate  to  put  the  indirect  cost  of  such  taxes 
at  one  fourth  of  the  amount  collected  ;  but,  having  no 
proper  basis  for  an  estimate,  it  is  better  to  make  none. 

§  17.  Dealer's  profits.  The  profits  of  dealers  upon 
the  indirect  taxes,  which  they  pay  in  the  first  instance,  are 
plainly  a  charge  upon  consumers.  Take  earthenware,  as 
an  example.  In  consequence  of  the  great  cost  of  handling 
these  goods  and  the  constant  losses  by  breakage,  the  nomi- 


CROOKED    TAXATION.  2J 

nal  profit  of  dealers  is  rarely  as  low  as  50  per  cent.  This 
profit  is  charged,  as  a  matter  of  course,  upon  the  duty  as 
well  as  upon  the  cost.  The  duty  prior  to  1894,  was  nomi- 
nally 60  per  cent.,  but  actually  nearer  70  per  cent. ;  since 
packages  are  made  dutiable,  while  they  are  useless,  after 
being  once  used.  To  call  the  actual  tax  66J-  per  cent, 
is  moderate.  But  the  tax  to  the  consumer,  plus  the 
dealer's  profit,  was  never  less  than  100  per  cent,  and  often 
far  more.  Precisely  the  same  addition  would  be  made 
to  the  cost  of  a  similar  domestic  article,  if  subject  to  a 
similar  excise  duty. 

Nominal  profits  upon  unbreakable  articles  are  by  no 
means  so  large.  Yet  to  call  the  general  average  of  mer- 
cantile profits,  before  the  consumer  is  reached,  only  15 
per  cent.,  is  ridiculously  low.  No  estimate,  of  which  the 
writer  is  aware,  puts  it  lower  than  25  per  cent.  Neverthe- 
less, the  lowest  conceivable  figure  shall  be  here  accepted. 

The  profits  collected  upon  local  taxes  on  buildings  and 
chattels  must  be  put  still  lower.  Let  them  stand  at 
only  5  per  cent. 

§  18.  Burden  of  taxes  and  profits.  On  the  basis  of 
the  foregoing  explanations,  and  upon  the  census  and  other 
official  statistics  for  1880  (those  for  1890  being  not  even 
yet  quite  complete),  the  following  tables  are  constructed. 

American   Tax  Burden  of  1880. 

Import  duties $186,500,000 

Internal  revenue,  etc 147,000,000 

Increased  prices  domestic  pro- 
tected goods 559,500,000 


Total $893,000,000 

Dealers'  profits,  15  per  cent. .   134,000,000 

$1,027,000,000 

Local  taxes $312,000,000 

Landlords'  and   dealers'  prof- 
its, 5  per  cent 15,600,000 

327,600,000 


Grand  total , . , . .         $1 ,354,600,000 


28  NATURAL    TAXATION. 

Out  of  what  fund  can  these  taxes  and  profits  be  paid  ? 
Not  out  of  what  the  people  spend,  but  out  of  what,  but 
for  these  charges,  they  would  save. 

In  proportion  to  what  are  they  paid  ?  Not  in  propor- 
tion to  what  is  saved,  but  strictly  in  proportion  to  what 
is  spent  upon  living.  The  larger  the  proportion  which 
the  necessary  cost  of  mere  subsistence  for  himself  and  his 
family  bears  to  each  man's  income  or  property,  the  larger, 
in  exact  proportion,  is  his  relative  share  of  compulsory 
taxation.  If  he  chooses,  for  his  own  pleasure,  to  increase 
his  expenditure  much  beyond  this  limit,  he  bears  a  larger 
proportion  of  the  actual  burden  of  taxation  ;  but  this  is 
not  compulsory  upon  him. 

As,  however,  nearly  all  men  of  more  than  average 
wealth  do  spend  more  than  is  absolutely  necessary,  the 
correct  method  of  ascertaining  the  relative  tax  burden  of 
each  class  is  to  estimate  the  average  expenditure  of  that 
class,  disregarding  the  extremes  of  extravagance  or  stint. 

The  estimate  in  Mr.  Gannett's  census  report  of  accu- 
mulation for  the  ten  years  between  1870  and  1880  was 
$1,300,000,000  per  annum.  This  figure  will  be  accepted 
for  the  last  year  of  the  series.  The  census  of  1890  esti- 
mates the  annual  savings  since  1880  at  $2,000,000,000. 

§  19.  Earnings  of  the  people.  Adopting  the  census 
of  i8£oas  the  basis,  as  we  must  at  present,  there  were 
then  about  17,400,000  producers,  supporting  each  a  group 
of  three  persons,  disregarding  fractions.  The  earnings 
of  3,000,000  to  5,000,000  farm  laborers  in  the  census 
year  1879  were  shown  by  the  agricultural  report  to  be 
less  than  $194,  on  an  average,  including  the  cost  of 
their  living.  The  earnings  of  4,000,000  farmers  were 
less  than  $300  each.  The  earnings  of  2,700,000  artisans 
averaged  $546.  It  is  often  claimed  that  this  repre- 
sents only  a  portion  of  their  earnings,  and  that  the  cen- 
sus gives  the  total  amount  of  wages  paid  in  the  year 


CROOKED    TAXATION.  2Q 

against  the  largest  number  of  laborers  ever  employed  at 
any  time.  This  is  not  true.  The  census  distinctly  states 
that  only  the  average  number  of  laborers  is  given  ;  and 
therefore  it  is  entirely  proper  that  the  whole  amount  of 
wages  should  be  given.  It  is  to  be  remembered  that  this 
average  of  $346  includes  the  earnings  upon  which  a  group 
of  three  only  are  supported.  The  average  family  num- 
bering five,  this  income  represents  an  average  family  in- 
come of  $577.  So  far  from  being  too  low,  this  is  actually 
much  too  high.  It  is  much  more  than  the  average  earn- 
ings of  mechanics'  families  in  cities.  It  is  $62  more  than 
the  average  railroad  employee  earned,  in  1888,  when  work- 
ing 3  1  3  full  days  in  the  year.1  Four  hundred  and  fifty  dol- 
lars would  be  an  ample  estimate  of  the  average  income  of 
four  fifths  of  American  families.  Nevertheless,  the  exces- 
sive amount  of  $300  for  each  worker,  equal  to  $500  for 
each  family,  will  be  here  accepted  as  the  lowest  range  of 
average  income,  with  $400  for  each  worker,  or  $666  for 
each  family,  in  the  next  grade. 

What  were  the  total  earnings  of  the  whole  people? 
The  officials,  who  had  themselves  taken  a  large  part  of 
the  census  of  1880,  and  who  remained  in  office  after  Gen- 
eral Walker  retired,  became  alarmed  at  its  showing  upon 
this  point.  By  no  manipulation  consistent  with  the  fig- 
ures could  it  be  made  to  show  a  gross  production  of  much 
more  than  $5,000,000,000  per  annum.  One  census  taker 
then  guessed  that  farm  products  were  underestimated 
$1,400,000,000,  while  another  guessed  that  manufactures 
were  underestimated  $3,400,000,000.  The  agriculturist 
was  not  so  wise  as  the  manufacturer,  and  gave  reasons  for 
his  guess.  Of  course  the  reasons  cut  down  the  guess  at 
least  one  third.  The  manufacturing  guess  shows  too 
much  evidence  of  manufacture  upon  its  face.  Still,  the 
real  census  figures  are  undoubtedly  too  low.  We  have 

1U.  S.  Labor  Report,  1889,  p.  160. 


OF  THE 

TJNIVERSr 


3O  NATURAL    TAXATION. 

to  guess.  Building  up  from  the  foundation  of  a  mini- 
mum average  earning  of  $300  for  each  worker,  or  $500 
for  each  family  (which  is  decidedly  too  much)  ;  allowing 
an  average  of  $1,000  for  each  of  1,000,000  workers  in 
the  centre,  which  Mr.  Atkinson  has  pretty  clearly  proved, 
and  making  the  least  reasonable  allowance  for  the  large 
incomes  of  the  richer  classes,  we  reach  the  conclusion 
that  the  actual  production  of  the  nation  in  1880  was 
between  $8,300,000,000  and  $9,000,000,000.  Prof.  W. 
T.  Harris,  after  analyzing  the  original  and  amended 
census  figures,  estimates  the  same  income  at  only 
$7,300,000,000  (Forum,  July,  1887).  If  the  average  in- 
come of  the  basic  13,000,000  workers  was  only  $225 
instead  of  $300,  Professor  Harris's  estimate  is  probably 
correct.  Knowing,  as  we  do,  that  several  millions  of 
them  did  not  average  even  $200,  it  is  quite  possible  that 
he  is  correct.  But  as,  upon  this  basis,  the  disproportion 
between  the  burdens  imposed  upon  the  rich  and  the  poor 
would  become  too  startling  for  general  acceptance,  it  is 
better  to  err  upon  the  safe  side,  and  to  assume  that  the 
earnings  of  farmers  and  mechanics  were  far  greater  than 
any  one  has  ever  been  able  to  prove  them  to  be.  All  such 
figures  must  necessarily  be  largely  guesswork  ;  but  it  will 
be  found  that  no  reasonable  guesses  can  be  made  which 
will  materially  alter  the  final  general  result.  We  may 
proceed  to  rectify  all  these  guesses,  by  comparison  with 
actual  returns  of  incomes,  made  during  the  existence  of 
an  income  tax. 

§  20.  Income  tax  returns,  1866.  It  is  much  to  be  re- 
gretted that  no  correct  statistics  of  the  incomes  of  the 
people  of  the  United  States,  during  the  years  when  an 
income  tax  was  levied,  seem  to  be  attainable.  The  fig- 
ures given  in  Lalor's  Cyclopcedia  do  not  agree  in  any  re- 
spect with  those  of  official  reports  of  the  Commissioners 
of  Internal  Revenue  ;  and  neither  set  of  tables  works 


CROOKED    TAXATION.  31 

out  any  result  which  agrees  with  the  taxes  collected. 
Only  some  suggestions  towards  a  correct  result  can  be 
gathered  from  any  of  these  figures.  It  appears  that  in 
1866,  under  a  law  exempting  $600  and  house  rent,  in- 
comes were  returned,  from  business  profits  and  salaries, 
by  460,000  persons,  to  the  gross  amount  of  about  $885,- 
333,000;  which,  after  adding  the  $600  exempted  and  an 
estimated  average  house  rent  of  $400,  which  is  none  too 
much,  would  make  a  total  income  of  $1,345,000,000. 
This  amount  represents  that  upon  which  the  tax  was  paid 
in  1867  ;  and,  although  a  large  part  of  this  payment  was 
made  on  account  of  assessments  made  in  1865,  an  equally 
large  part  of  the  assessments  of  1866  was  not  paid  until 
1868  ;  so  that  the  one  balances  the  other. 

Of  these  460,000  taxpayers,  about  37,000  (or  8  per  cent.) 
acknowledged  incomes  exceeding  $5600  and  house  rent, 
which,  in  their  cases,  must  be  estimated  at  fully  $900  ad- 
ditional. This  would  make  their  incomes  exceed  $6500. 
Their  total  incomes  amounted  to  over  $312,000,000,  in- 
cluding house  rent.  This  is  somewhat  less  than  25  per 
cent,  of  the  whole  ;  but,  as  the  proportion  was  much 
larger  in  1865,  25  per  cent,  will  be  a  fair  average. 

In  the  city  of  Brooklyn,  in  1865,  1734  persons  returned 
incomes  exceeding  $5600  and  house  rent;  of  whom  801 
returned  incomes  exceeding  $10,600  and  rent.  It  will  be 
reasonable  to  classify  them  into  incomes  of  $6500  and  of 
$12,500  minimum  respectively.  In  the  poorer  district  of 
Brooklyn,  the  richer  class  constituted  40  per  cent,  of  the 
whole  class  above  $6500  ;  in  the  wealthier  district,  the 
proportion  was  48  per  cent.  It  will  be  a  very  moderate 
estimate  to  put  the  incomes  of  the  whole  country,  exceed- 
ing $10,000,  at  37!-  Per  cent-  °f  all  exceeding  $5000.  In 
Great  Britain  the  proportion  considerably  exceeds  40  per 
cent. 

Even  in  those  European  countries  where  the  income- 


32  NATURAL    TAXATION. 

tax  is  most  rigorously  and  honestly  enforced,  it  is  univer- 
sally conceded  that  at  least  one  third  of  the  assessable 
income  is  never  returned.  In  the  United  States  there  can 
be  no  doubt  that  less  than  half  of  the  tax  really  due  was 
ever  collected.  The  administration  of  the  law  was  every- 
where corrupt ;  and  in  most  of  the  western  and  southern 
States  it  was  a  mere  farce.  It  is  a  moderate  estimate  to 
assume  that  there  were  really  more  than  800,000  persons 
in  receipt  of  incomes  exceeding  $700,  in  1866,  and  that 
their  aggregate  income  exceeded  $2,500,000,000,  or  about 
$3000  each  on  an  average.  These  may  be  divided  into 
three  classes,  viz. : 

I.  720,000  at  $  700  to  $  5,000. 
II.   50,000  "  5,000  "  10,000. 
III.   30,000  "  over  $10,000. 

When  the  exemption  was  increased  to  $1000  and  house 
rent,  the  number  of  taxpayers  fell  off  to  about  260,000 ; 
and  upon  the  exemption  of  $2000  the  number  fell  to  75,- 
ooo.  There  is  nothing  to  be  learned  from  the  study  of 
returns  so  palpably  fraudulent.  It  is  to  be  hoped  that 
much  better  information  will  be  gathered  from  returns 
under  the  new  law  in  1895. 

§  21.  Estimated  incomes,  1880.  The  increase  of 
wealth  in  the  United  States,  between  1866  and  1880, 
according  to  the  valuation  of  real  estate  (which  is  the 
only  safe  test),  was  65  per  cent.  The  increase  of  popu- 
lation was  35  per  cent.  Taking  the  medium  figure  of  50 
per  cent.,  as  the  increase  in  the  number  of  large  incomes, 
the  result  would  be  as  follows : 

American  Incomes  Over  $700. 
Incomes.  Persons. 

1866  1880 

$      700  to  $  5,000 720,000  1,100,000 

5,000  to     10,000 50,000  75,000 

10,000  upwards 30,000  45,000 


800,000  1,220,000 


CROOKED    TAXATION. 


33 


Income.                    Average    Income. 
^50,000  &  over                     .£91,783 

10  to  50,000 

17,644 

5 

iO,OOO 

6,553 

4 

5,ooo 

4,270 

3 

4,000 

3,266 

2 

3,000 

2,282 

I 

2,000 

1,277 

500 

1,000  I 

"UI 

400 

500} 

OT* 

300 

400 

367 

2OO 
150 

300? 

200  J 

197 

We  must  collect  any  further  light  on  the  classification 
of  incomes  from  a  study  of  the  British  income-tax  re- 
returns.  The  following  table  shows  the  official  return  of 

GREAT  BRITAIN  AND  IRELAND. 

Business  Incomes  in  1884. 

Persons. 
104 
1,192 
1,871 
1,117 
1,947 

4,202 

13,268 
32,769 

19.996 

48,572 

110,626 

163,736 
399,400 

These  returns  represent  only  earnings  from  personal 
services  and  profits  derived  from  business,  other  than 
farming.  Rents,  incomes  from  corporate  investments, 
mining,  farming,  etc.,  are  not  included.  As  67,000  farm- 
ers and  at  least  as  many  landlords  also  made  returns,  it  is 
obvious  that  the  list  is  a  very  incomplete  statement  of  the 
income  taxpayers.  Not  less  than  200,000  British  families 
live  upon  their  investments  alone;  and  the  whole  num- 
ber of  incomes  above  ^150  must  have  exceeded  600,000  in 
1884. 

§  22.  Savings  of  each  class.  Let  us  now  estimate 
the  probable  savings  of  each  class,  in  1880,  after  all  taxes 
were  paid. 

Labor  commissioners  have  repeatedly  inquired  into 
the  savings  of  laborers,  with  the  result  of  fixing  these  at 
not  more  than  5  per  cent,  of  such  incomes  under  $500, 
after  all  taxes  have  been  paid.  As  taxes  consume, 
directly  and  indirectly,  at  least  15  per  cent,  of  a  laborer's 
average  income,  the  average  laborer  is  not  so  thriftless  as 


34 


NATURAL    TAXATION'. 


it  might  at  first  appear.  He  does  not  spend  more  than 
80  per  cent  of  his  earnings.  A  paternal  government  takes 
care  of  that.  The  middle  class  find  it  difficult  to  save 
more  than  10  per  cent.  But  the  savings  of  the  rich  pro- 
ceed upon  a  rapidly  increasing  ratio,  until  we  reach 
some  men  who  save,  with  ease,  95  per  cent,  of  their  in- 
come. This  is  not  common ;  but  there  are  well-known 
instances  of  persons  whose  income  exceeds  $1,000,000, 
whose  expenditures  do  not  equal  2  per  cent  of  their  in- 
come. Such  persons  are  practically  exempt  from  all  taxa- 
tion by  the  Federal  Government. 

Constructing  a  table  upon  the  foundations  thus  afforded, 
taking  American  statistics  so  far  as  they  go,  and  using 
British  statistics  only  for  the  purpose  of  supplementing 
and  classifying  American  figures,  the  following  is  the 
result : 

American  Incomes,  Expenses,  and  Savings,  1880. 


Income. 

A 

Average 

Average 

Class. 

Persons. 

Range. 

Average. 

Expenses. 

Savings. 

I. 

5° 

over 

$1,000,000 

$1,500,000 

$250,000 

$1,250,000 

II. 

500 

250,000  to 

1,000,000 

450,ooo 

100,000 

350,000 

III. 

5,ooo 

50,000  to 

250,000 

88,000 

40,000 

48,000 

IV. 

12,500 

20,000  to 

50,000 

27,500     J        15,000 

12,500 

V. 

27,000 

10,000  to 

20,000 

14,000 

9,000 

5,ooo 

VI. 

75,000 

5,000  to 

10,000 

6,400 

5,ooo 

1,400 

VII. 

250,000 

2,000  tO 

5,000 

2,700 

2,300 

400 

VIII. 

850,000 

700  to 

2,000 

1,000 

850 

150 

IX. 

2,500,000 

350  to 

700 

400 

380 

20 

X. 

13,672,000 

under    350 

300 

285 

15 

CROOKED    TAXATION. 


35 


It  is  now  necessary  to  tabulate  the  aggregate  expenses 
and  savings  of  each  class,  as  an  entire  class. 

American  Incomes,  Expenses,  and  Savings,  1880. 


Total 

Total 

Total 

Class. 

Persons. 

Income. 

Expenses. 

Savings. 

I. 

50 

$75,000,000 

$12,500,000 

$62,500,000 

II. 

500 

225,000,000 

50,000,000 

175,000,000 

III. 

5,000 

440.000,000 

200,000,000 

200,000,000 

IV. 

12,500 

J43,750,ooo 

187,500,000 

156,250,000 

V. 

27,000 

378,000,000 

243,000,000 

135,000,000 

VI. 

75,000 

480,000,000 

375,000,000 

105,000,000 

VII. 

250,000 

675,000,000 

575,000,000 

100,000,000 

VIII. 

850,000 

850,000,000 

722,500,000 

127,500,000 

IX. 

2,500,000 

1,000,000,000 

950,000,000 

50,000,000 

X. 

13,672,000 

4,101,600,000 

3,896,520,000 

205,080,000 

17,392,050 

$8,568,350,000 

$7,212,020,000 

$1,356,330,000 

§  23.  Incidence  of  taxation.  The  incidence  of  taxa- 
tion is  now  to  be  considered.  The  gross  expense  of 
the  people's  living  has  been  estimated,  as  above,  at 
$7,212,000,000  for  the  year  1880.  Taxation  was  dis- 
tributed nearly  pro  rata  upon  this.  The  whole  burden  of 
taxation,  including  its  intended  and  unintended  effects, 
has  been  shown  to  be  $1,350,000,000.  This  was  equal  to 
i8T^j-  per  cent,  on  expenses.  As  the  total  savings,  before 
taxes  are  deducted,  would  amount  to  $2,700,000,000,  the 
ultimate  burden  imposed  by  taxation  and  its  effects  was 
50  per  cent,  of  all  the  national  savings. 

But,  while  this  is  the  average,  that  average  is  based  on 
a  vast  disproportion  of  burdens.  The  tax  of  iSy7^  per 
cent,  upon  expenses  means  a  tax  of  less  than  4  per  cent, 
upon  the  easy  savings  of  the  richest  class,  but  of  78  per 
cent,  upon  the  hard  savings  of  the  poorer  class.  Indirect 
taxation,  therefore,  bears  twenty  times  as  heavily  upon 
the  average  poor  man  as  it  does  upon  the  average  rich  man. 


NATURAL    TAXATION-. 


This  will  appear  by  the  next  table,  in  which  is  given  : 

1.  The  annual  expenses  of  each  class  ; 

2.  The  tax  burden  at  iSj7^  per  cent,  on  such  expenses; 
and 

3.  The  savings  which  each  class  could  make,  with  no 
greater  self-denial  than  at  present,  if  it  were  relieved  from 
all  taxation. 

American  Tax  Burdens,  1880. 


Persons. 

Total  Income. 

Expenses. 

Tax  Burden, 

isTV  *. 

Taxable 
Savings. 

Savings  left 
after  Taxation. 

50 

$75,000,000 

$12,500,000 

$2,337,500 

$64,837,500 

$62,500,00^ 

500 

225,000,000 

50,000,000 

9,350,000 

184,350,000 

175,000,000 

5,000 

440,000,000 

200,000,000 

37,400,000 

277,400,000 

240,000,000 

12,500 

343,750,000 

187,500,000 

35,062,500 

191,312,500 

156,250,000 

27,000 

378,000,000 

243,000,000 

45,441,000 

180,441,000 

135,000,000 

75,000 

480,000,000 

375,000,000 

70,125,000 

175,125,000 

105,000,000 

250,000 

675,000,000 

575,000,000 

107,525,000 

207,525,000 

100,000,000 

850,000 

850,000,000 

722,500,000 

135,107,500 

262,607,500 

127,500,000 

2,500,000 

1,000,000,000 

950  000,000 

177,650,000 

227,650,000 

50,000,000 

13,672,000 

4,101,600,000 

3,896,520,000 

728,649,240 

933,729,240 

205,080,000 

17,392,050 

18,568,350,000 

$7,212,020,000 

$1,348,647,740 

$2,704,977,740 

$1,356,330,000 

§  24.  Concentration  of  wealth  through  unequal  taxa- 
tion. The  general  effect  of  this  inequality  of  taxation 
will  be  better  understood  by  dividing  the  community  into 
three  classes,  as  is  done  in  other  countries,  calling  them 
the  rich,  the  middle,  and  the  laboring  classes. 

Under  the  system  of  taxation,  existing  in  1880,  the 
stored-up  wealth  of  the  community  was  annually  divided 
about  as  follows  : 


American  Annual  Accumulations,  1880. 


Class. 
Rich. 

Middle 
Laboring 


Total, 


Persons. 

120,000 

1,100,000 

16,172,000 


17,392,000 


Accumulations. 

$873,750,000 

227,500,000 

255,080,000 

$1,356,330,000 


CROOKED  TAXATION.  37 

If  these  calculations  are  at  all  correct,  they  demon- 
strate that,  in  1880,  fully  half  of  the  annual  accumulations 
of  the  country  fell  into  the  hands  of  less  than  28,000 
families.1 

But,  it  will  be  asked  :  Is  this  the  result  of  indirect  taxa- 
tion? Certainly  it  is.  If  taxation  were  direct  and  exactly 
equal,  the  annual  savings  of  each  class  should  bear  the 
same  proportion  to  each  other,  after  taxation,  that  they 
did  before.  Taxation,  in  short,  should  at  least  not  make 
the  poor  relatively  poorer  than  the  richer  classes.  Let  us 
see,  then,  how  the  case  would  stand  if  there  were  no 
taxes,  no  bounties,  and  no  favoritism. 

Natural  Savings,  in  the  Absence  of  Taxes,  1880. 

Class.  Persons.  Untaxed  Savings. 

Rich.  120,000  $1,073,466,000 

Middle.  1,100,000  470,132,500 

Laboring.  16,172,000  1,161,379,240 

Total,         17,392,000  $2,704,977,740 

On  this  basis,  it  will  be  seen,  the  laboring  masses  woul  i 
gain  43  per  cent,  of  all  the  wealth,  instead  of  less  than  19 
per  cent.,  as  at  present ;  while  the  middle  and  laboring 
classes  together  would  gain  60  per  cent,  instead  of  36 
per  cent. 

But  upon  what  principle  of  equity  or  economic  science 
should  any  artificial  taxes  be  laid  upon  the  masses  of  men, 
whose  incomes  fall  below  $400  to  a  family  ?  Why  should 
not  taxation  fall  upon  property  instead  of  labor  ?  Why 
should  it  be  taken  out  of  the  means  necessary  to  a  bare 
living  ?  It  is  idle  to  say  that  taxation  of  labor  promotes 
economical  government.  It  never  has  done  so  ;  and  it 

1  Of  the  whole  accumulation,  $1,356,330,000,  over  $633,000,000  fell  to 
18,000  families,  and  $50,000,000  more  to  less  than  10,000  families  included 
in  Class  V. 


38  NATURAL    TAXATION. 

never  will.  It  has  already  been  pointed  out  that  indirect 
taxes  are  maintained  for  the  very  purpose  of  convincing 
the  vast  majority  that  they  are  not  taxed,  and  that  they 
have  no  interest  in  economical  and  prudent  government. 
It  is  beyond  contradiction  that  this  is  the  design  and  effect 
of  such  taxes.  It  is  absurd  to  contend  that  they  must  be 
maintained,  in  order  to  secure  the  votes  of  the  majority 
for  good  and  cheap  government,  when  their  chief  object 
is  to  prevent  these  voters  from  feeling  any  personal  in- 
terest in  that  question. 


CHAPTER  III. 
DIRECT  TAXATION. 

§  I.  Direct  taxation  practicable.  Nature  having  made 
it  perfectly  clear  that  indirect  taxation  is  not  natural,  by 
making  the  collection  of  such  taxes  impossible  without 
gross  inequality,  fraud,  hindrance  to  production,  and  gen- 
eral demoralization,  it  is  absolutely  necessary  for  those 
who  care  for  justice,  equality,  and  good  morals,  to  select 
some  form  of  direct  taxation. 

The  principal  objection  raised  against  direct  taxation 
is  the  alleged  unwillingness  of  the  people  to  pay  such 
taxes,  and  the  consequent  difficulty  and  expense  of  col- 
lecting them.  So  strongly  is  this  objection  felt,  that 
many  persons,  who  favor  direct  taxation  for  old-established 
communities,  assume  as  an  indisputable  fact  that,  in  new 
and  thinly  settled  countries,  it  would  be  impossible  to 
raise  an  adequate  revenue  by  direct  taxes. 

As  invariably  happens,  in  cases  where  economic  laws 
are  thrust  aside  by  practical  men,  on  the  plea  that  they 
are  sound  in  theory,  but  will  not  work  in  practice,  all 
human  experience  contradicts  this  assumption. 

The  newest  and  most  thinly  settled  communities  in- 
variably do  raise  their  public  revenue  by  direct  taxation ; 
and  indirect  taxation  is  impossible,  until  they  have  ob- 
tained a  considerable  degree  of  growth  and  an  advanced 
social  organization.  Can  any  society  be  more  new  or  any 

39 


40  NATURAL  TAXATION. 

country  be  more  sparsely  settled  than  were  all  the  differ- 
ent territories  of  the  United  States,  when  first  opened  for 
settlement  ?  Yet  was  there  a  single  village  or  school  dis- 
trict in  them  all,  which  raised  its  first  revenues  by  indirect 
taxes?  It  may  be  said  that  this  was  only  because  the 
United  States  Constitution  prohibited  them  from  sur- 
rounding themselves  with  a  tariff.  But  the  history  of 
mankind  may  be  searched  in  vain  for  any  absolutely  new 
community,  which  raised  its  first  taxes  by  means  of  a 
tariff  on  imports  or  on  exports,  by  excise  duties,  or  by 
any  indirect  taxes  whatever.  A  moment's  reflection  will 
show  that  the  very  idea  is  absurd.  Every  new  settlement 
is  eager  for  imports;  and  it  would  rather  offer  a  bounty 
for  them  than  place  a  tax  upon  them.  It  clamors  for  pro- 
duction, manufactures,  and  trade  ;  and  it  lays  no  taxes  on 
production. 

With  this  idea  also  falls  the  other  idea,  that  direct  taxes 
are  necessarily  more  difficult  of  collection  than  others. 
Some  forms  of  direct  taxes  are  difficult  of  collection,  and 
increasingly  so  as  the  community  advances  in  wealth  and 
civilization.  This  is  because  those  particular  taxes  are 
not  founded  upon  justice;  and  their  injustice  becomes 
more  and  more  apparent  with  the  growth  of  the  com- 
munity. But  if  it  can  be  shown  that  there  is  a  tax  which 
men  everywhere  are  willing  to  pay,  partly  because  they 
feel  that  they  receive  full  equivalent  for  the  tax,  and 
partly  because  the  pressure  for  payment  is  practically 
irresistible,  and  if  this  tax  can  be  collected  with  ease, 
equality,  and  justice,  all  these  objections  will  fall  to  the 
ground. 

As  the  only  forms  of  direct  taxation,  now  in  use,  by 
means  of  which  an  adequate  public  revenue  could  be 
obtained,  are  an  Income  Tax,  a  Succession  Tax,  and  a 
tax  upon  the  value  of  some  part  or  all  of  real  and  per- 


DIRECT   TAXATION.  4! 

sonal  property,  usually   called   a  General   Property  Tax, 
our  attention  may  as  well  be  confined  to  these  taxes. 

§  2.  The  general  income  tax.  The  first  impression  of 
most  students  of  taxation  is  probably  in  favor  of  a  general 
income  tax  ;  that  is,  a  tax  upon  incomes  from  earnings,  as 
well  as  from  investments.  But  this  impression  is  soon 
dissipated  by  a  careful  study  of  the  subject.  Assuming 
this  to  be  the  only  tax,  it  is  manifestly  unfair  that  a  man 
who  derives  his  income  from  accumulated  wealth  should 
pay  no  more  than  another,  who  earns-  all  his  income  by 
hard  personal  labor.  If  the  rate  of  taxation  is  uniform, 
it  bears  severely  upon  the  poor,  as  compared  with  the 
rich.  If  it  is  graduated,  increasing  with  increasing  income, 
it  cannot  be  efficiently  collected  ;  because  the  method  of 
collection  at  the  source  of  income,  by  authorizing  corpo- 
rations to  deduct  the  tax  from  dividends  and  interest,  and 
tenants  to  deduct  the  tax  from  their  rents,  would  be  im-. 
possible  under  a  graduated  tax;  and  the  assessor  would 
have  no  means  of  securing  returns,  except  by  the  personal 
oath  of  the  taxpayer,  which  long  experience  shows  to  be  a 
very  poor  security.  Under  any  system,  an  income  tax 
upon  earnings  and  profits  has  to  be  assessed  largely  in 
reliance  upon  such  oaths ;  and  the  consequence  is  that, 
even  under  the  rigid  and  honest  administration  of  the  law, 
which  prevails  in  England  and  several  European  states, 
fully  one  third  of  this  part  of  the  tax  is  evaded  by  false 
returns.  In  the  United  States,  during  the  ten  years' 
existence  of  an  income  tax,  the  proportion  of  evasion  was 
very  much  larger,  averaging  not  less  than  half,  for  the 
entire  period,  and  mounting  up  to  more  than  two  thirds 
at  the  close.  In  several  States,  there  can  be  no  doubt 
that  nine  tenths  of  the  whole  taxable  income  escaped  from 
the  tax.  The  general  income  tax  is  thus  a  fruitful  source 
of  perjury  ;  and  it  cannot  be  a  scientific  or  natural  tax,  for 


42  NATURAL    TAXATION1. 

that  reason.  Since  perjurers  would  thus  escape  taxation, 
in  whole  or  in  part,  it  is  manifest  that  the  tax  would  be 
unequal  in  its  operation  and  would  bear  twice  as  heavily 
upon  the  honest  as  upon  the  dishonest. 

Furthermore,  a  strict  income  tax  would  collect  nothing 
from  property  which  is  held  out  of  use.  The  landlord 
who  improved  his  land  would  be  taxed  ;  but  the  landlord 
who  held  it  vacant  would  not  be  taxed  at  all.  Thus  a 
bounty  would  be  put  upon  land  speculation.  It  may  be 
said  that  the  annual  rise  in  value  might  be  assessed  as 
income.  But  it  would  not  really  be  income;  and  a  tax 
upon  that  would  not  be  in  fact  or  in  law  an  income  tax.  If 
such  fictitious  incomes  were  assessed,  every  taxpayer  must 
obviously  be  allowed  to  deduct  from  his  income,  for  pur- 
poses of  taxation,  any  fall  in  the  value  of  his  land,  with- 
out testing  the  market  by  a  sale.  Such  allowances,  it  is 
evident,  would  leave  a  wide  door  for  fraud  and  evasion. 

§3.  Excuse  for  income  taxes  in  America.  Under 
the  peculiar  political  conditions  of  the  United  States, 
there  is  much  excuse  for  an  income  tax,  as  a  transition- 
ary  measure  of  national  taxation.  The  Federal  Consti- 
tution requires  all  " direct  taxes"  to  be  apportioned 
among  the  States,  according  to  population,  with  entire 
disregard  of  their  wealth  or  land.  A  direct  tax  upon  the 
value  of  real  estate,  under  this  provision,  would  exact 
from  North  Carolina  about  five  dollars,  and  from  South 
Carolina  about  seven  dollars,  on  the  same  real-estate  value 
which,  in  Rhode  Island,  would  pay  one  dollar.  It  would 
exact  from  Missouri  a  larger  tax  than  from  Massachusetts 
and  Rhode  Island  together;  although  the  value  of  real 
estate  in  those  two  States  is  sixty  per  cent,  greater  than 
in  Missouri.  Each  dollar's  worth  of  land  in  Tennessee 
would  be  taxed  more  than  twice  as  heavily  as  in  Wiscon- 
sin. Taxes,  even  within  New  England,  would  be  very 


DIRECT   TAXATION.  43 

unequally  distributed.  Land  in  Vermont  would  be  taxed 
150  percent,  more  than  in  Massachusetts  or  Rhode  Island. 
If  personal  property  were  also  taxed,  the  discrepancies 
would  be  still  greater. 

Until  April,  1895,  it  was  supposed  to  be  settled  law  that 
an  income  tax  was  not  such  a  "  direct  tax,"  as  the  framers 
of  the  Constitution  had  in  mind,  and  therefore  that  it 
could  be  levied  without  regard  to  population  or  State 
lines. l  Decisions  to  this  effect  made  this  tax  in  effect  the 
only  direct  tax,  in  the  scientific  sense,  which  could  be 
adopted  in  the  United  States,  without  great  inequalities 
between  the  States,  until  the  Constitution  can  be  amended. 
The  recent  judgment  of  the  Supreme  Court,  exempting 
rents  from  income  tax  and  casting  doubt  upon  the  whole 
system,  will  probably  stir  up  a  movement  for  such  an 
amendment,  which  can  easily  be  obtained,  whenever  the 
people  are  resolved  to  abolish  all  indirect  taxation.  But 
without  the  support  of  a  very  strong  public  sentiment, 
amendments  to  the  Federal  Constitution  are  impossible, 
as  two  thirds  of  Congress  and  three  fourths  of  the  State 
legislatures  must  concur  in  their  adoption.  The  taxation 
of  incomes  in  general,  while  rents  are  entirely  untaxed,  is 
a  monstrous  anomaly,  which  will  certainly  be  remedied  at 
a  comparatively  early  day. 

But  as  the  purpose  of  the  present  inquiry  is  to  ascer- 
tain what  ought  to  be  done,  without  regard  to  questions 
of  present  practicability  or  temporary  expediency,  this 
political  difficulty  need  not  be  further  discussed.  It  may 
be  noted,  nevertheless,  that  an  income  tax,  levied  exclu- 
sively at  the  sources  of  income,  could  be  made  to  reach, 
with  great  approximation  to  equality,  all  rents,  dividends, 
corporate  payments  of  interest,  and  perhaps  mortgage 
interest.  As  will  be  hereafter  shown,  the  same  results  can 

1  Springer  v.  United  States,  102  U.  S.,  586. 


44  NATURAL    TAXATION. 

be  attained  by  much  better  methods,  so  far  as  they  ought 
to  be  attainable.  But  until  the  better  method  can  be 
introduced,  a  tax  upon  incomes,  at  their  source  only,  is 
much  better  than  any  form  of  indirect  taxation.  Only 
incomes  from  invested  wealth  can  thus  be  reached  (cer- 
tain classes  of  salaries  alone  excepted)  ;  but  no  other 
incomes  ought  to  be  taxed. 

§  4.  Income  tax  unfitted  for  local  use.  Even  as  a 
temporary  expedient,  however,  the  income  tax,  in  any 
form,  is  entirely  unfitted  for  use  in  American  States  and 
municipalities.  New  York,  New  Jersey,  and  Connec- 
ticut, for  example,  will  never  adopt  an  absolutely  uni- 
form income  tax  or  administer  it  on  uniform  principles. 
\  The  possessors  of  large  incomes,  therefore,  would  change 
their  residences  from  one  State  or  county  to  another, 
so  as  to  make  their  returns  wherever  the  law  or  the 
(  assessor  was  most^fa^araBte — fce  them.  If  some  States 
undertook  To~tax  incomes  at  their  source,  while  other 
States  persisted  in  the  old-fashioned  method  of  individual 
returns  of  income  received,  there  would  be  a  great  amount 
of  double  taxation.  Rents  of  New  York  property,  due  to 
a  Bostonian,  would  be  taxed  in  New  York  against  the 
tenant,  and  again  taxed  in  Boston  against  the  landlord. 
Such  injustice  would  soon  give  provocation  and  excuse 
for  fraudulent  returns.  There  is  an  income  tax  in  Massa- 
chusetts ;  but  it  is  an  utter  failure,  only  aggravating  the 
evils  of  the  bad  system  of  taxation  there  in  use. 

§  5.  Other  objections  to  income  tax.  An  income 
tax  upon  interest  is  clearly  not  a  direct  tax.  The  burden 
will  be  largely,  if  not  entirely,  shifted  upon  the  borrower. 
A  tax  upon  rents  will  fall  principally  upon  what  is  not 
"  rent "  at  all,  in  economic  science,  that  is,  upon  the 
annual  price  paid  for  the  use  of  buildings  and  improve- 
ments. All  of  this  tax  must,  in  the  long  run,  be  paid  by 


DIRECT   TAXATION.  45 

the  tenant.  To  this  extent,  therefore,  it  is  an  indirect 
tax  ;  although  not  so  easily  shifted  as  are  some  other 
taxes.  Upon  the  whole,  not  more  than  one  third  of  any 
tax  on  incomes  (other  than  earnings  and  profits)  is  strictly 
a  direct  tax. 

The  income  tax  can  never  be  accepted  as  the  only  tax, 
for  these  and  other  reasons.  It  can  be  used  only  by 
national  governments  ;  and  even  in  their  hands  it  must  be 
confined  to  subjects  of  taxation  which  can  be  much 
better  reached  by  a  straightforward  tax  upon  values, 
instead  of  upon  incomes.  The  general  income  tax,  upon 
earnings  and  profits  as  well  as  upon  fixed  property,  stands 
condemned  by  universal  experience,  as  an  incentive  to  per- 
jury, a  premium  upon  unproductive  land,  a  special  burden 
upon  the  honest,  the  simple,  the  widow,  and  the  orphan. 
Nature  shuts  this  door  also  in  the  face  of  honest  men. 

§  6.  The  succession  tax.  The  tax  on  successions, 
whether  by  legacy,  devise,  or  inheritance,  has  lately  be- 
come very  popular.  It  is  much  more  easily  collected  than 
the  income  tax,  because  it  is  paid  by  the  administrators 
of  dead  men's  estates,  who  have  generally  only  a  small 
interest  in  the  estate,  and  whose  conscience,  if  wounded 
by  perjury,  would  not  be  soothed  by  the  reflection  that 
the  profit  was  all  their  own.  The  ordinary  human  con- 
science becomes  wonderfully  tender,  when  asked  to  take 
a  false  oath  for  the  benefit  of  some  one  else. 

As  a  supplement  to  other  taxes,  the  succession  tax  has 
been  a  fair  success ;  because  it  has  not  become  so  heavy 
as  to  make  living  men  willing  to  risk  the  loss  of  their 
property  by  schemes  of  evasion  for  the  benefit  of  their 
heirs.  But,  if  it  became  the  sole  method  of  taxation,  it 
would  be  so  heavy  as  to  offer  strong  temptations  to  eva- 
sion. The  highest  estimate  of  the  annual  savings  of  the 
American  people,  added  to  the  annual  taxes,  is  not 


46  NATURAL    TAXATION. 

more  than  22  per  cent,  of  their  annual  earnings.  The 
lowest  estimate  of  their  taxes  is  7  per  cent,  of  those  earn- 
ings. As  the  value  of  property  passing  by  succession 
in  each  year  cannot,  upon  the  average,  exceed  the  annual 
savings,  the  succession  tax,  if  it  were  the  only  tax,  would 
absorb  one  third  of  all  estates  of  deceased  persons,  even 
if  every  article  of  such  estates  passed  through  the  probate 
courts  and  were  fully  taxed.  This,  however,  we  all  know 
to  be  impossible.  At  the  very  least,  one  third  of  the 
property  of  descendants  never  did  and  never  will  go 
through  the  courts  or  be  reached  by  any  such  tax.  It  is 
held  in  parcels  so  small  as  not  to  be  worth  the  expense  of 
court  proceedings ;  and  it  consists  of  furniture,  clothing, 
tools,  money  in  hand,  and  other  articles,  which  are  readily 
disposed  of  by  the  family,  without  dispute  or  publicity. 
Therefore  the  tax  actually  levied  upon  such  estates  as 
would  be  reached  by  the  assessors,  if  it  were  the  only  tax, 
would  exceed  50  per  cent,  of  their  whole  value.1  Execu- 
tors would  be  named  from  among  legatees  only ;  and  this 
enormous  tax  would  breed  evasion  and  perjury  among 
them,  just  as  certainly  as  does  the  smaller  tax,  now 
imposed  upon  personal  property  by  the  several  States. 
As  such  evasions  increased,  the  tax  upon  the  unfortunate 
few,  who  could  not  or  would  not  obtain  relief  in  the  same 
way,  would  constantly  increase,  until  the  government 
would  need  75  per  cent,  cf  all  property  reported;  by 
which  time  the  whole  system  would  collapse.  The  suc- 
cession tax  may  have  some  merits,  considered  as  a  mere 
supplement  to  other  forms  of  taxation  ;  but  it  never  can 
be  accepted  as  the  one  natural  tax. 

§  7.  Succession    tax    oppressive    on    widows,   etc. 
There  are  other  objections  to  this  tax.     If  it  is  collected 

1  In  New  York,  the  local  taxes  alone  exceed  40  per  cent,  of  the  value 
of  property  now  reported  for  the  succession  tax. 


DIRECT   TAXATION.  47 

impartially  from  all,  it  is  obviously  very  severe  in  its 
operation  upon  widows,  young  orphans,  and  aged  par- 
ents, who  are  the  principal  beneficiaries  of  dying  per- 
sons. Just  at  the  time  when  they  are  deprived  of  the 
earning  power  of  the  head  of  the  family  and  are  left  with 
nothing  but  the  income  from  his  savings  for  their  support 
— an  income  averaging  less  than  one  third  or  one  fourth 
of  that  to  which  they  were  accustomed, — the  State  steps 
in  and  cuts  off  a  large  portion  of  this.  From  her  that 
hath  not,  shall  be  taken  even  the  little  which  she  hath. 
If  collected  only  or  mainly  from  collateral  relatives  or 
strangers,  such  benefactions,  which  are  often  among  the 
most  commendable  portions  of  a  will,  are  sure  to  become 
more  and  more  rare.  It  would  thus  greatly  increase  the 
tendency  to  concentration  of  wealth.  If  the  succession 
tax  were  to  become  the  only  form  of  taxation,  it  would 
be  impossible  to  make  this  distinction ;  because  it  would 
then  absorb  almost  the  whole  of  collateral  inheritances, 
and  no  one,  who  had  a  wife  or  children,  would  leave  a 
dollar  to  any  one  else.  Even  under  a  very  moderate  tax 
it  was  speedily  found,  in  the  State  of  New  York,  that 
legacies  to  benevolent  and  philanthropic  institutions  were 
discouraged  ;  and  the  legislature  has  exempted  them  from 
much  of  this  taxation. 

§  8.  Succession  tax  leads  to  public  waste.  Another 
objection  to  the  succession  tax,  as  a  principal  source  of 
revenue,  and  one  which  ought  to  be  conclusive  against 
its  adoption  as  the  only  source,  is  that  it  must  be  con- 
stantly maintained  at  about  one  uniform  rate.  It  can- 
not be  frequently  changed  without  gross  injustice.  If  it 
fluctuates  according  to  the  needs  of  government,  the 
estate  of  one  man,  who  died  on  December  3ist,  might  be 
taxed  twice  as  much  as  the  estate  of  another,  who  died 
on  January  1st.  Wherever  this  tax  exists,  it  is  always 


48  NATURAL    TAXATION. 

maintained  at  the  same  rate  for  a  long  series  of  years.  If 
it  were  the  only  tax,  it  is  obvious  that  it  must  be  kept  at 
a  rate  which  would  always  produce  a  surplus  revenue  ;  for 
if  it  were  not,  it  would  often  fall  below  the  needs  of 
government.  It  would  therefore  always  lead  to  public 
extravagance  and  corruption.  But  even  where  it  is  only 
one  of  several  taxes,  as  in  the  State  of  New  York,  experi- 
ence already  shows  that  it  has  the  same  effect,  in  a  less 
degree.  While  at  first  it  reduces  the  burden  of  other 
taxation,  it  soon  tempts  the  government  to  increase  ex- 
penditures to  a  point  which  will  require  as  much  other 
taxation  as  the  people  were  accustomed  to  before.  Ac- 
cordingly, there  has  been  a  notable  increase  in  the  ex- 
penses of  government  in  States  which  have  an  efficient 
succession  tax ;  while  the  taxpayers  are  hoodwinked  by  a 
pretended  reduction  of  their  burdens. 


OF  THB 

TJNIVERS 


CHAPTER   IV. 
TAXATION  OF  PERSONAL  PROPERTY. 

§  I.  General  property  tax.  The  first  natural  impulse 
of  most  men,  when  called  upon  to  devise  a  system  of 
direct  taxation,  is  to  propose  a  general  property  tax, 
that  is,  to  make  a  valuation  of  all  property,  of  every  kind, 
and  to  tax  every  man  in  precise  proportion  to  his  share 
of  the  general  wealth.  Our  law  divides  property  into 
two  classes,  real  and  personal,  or,  as  the  civil  law  de- 
scribes them,  movable  and  immovable.  The  difference 
between  the  two  species  of  property  is  so  great,  especially 
when  considered  with  reference  to  taxability,  that  we 
must  separately  discuss  the  proposed  taxation  of  per- 
sonal property. 

In  every  State  of  this  Union  the  attempt  is  made  to 
tax  personal  property,  as  well  as  real,  by  a  direct  tax 
upon  its  appraised  value.  In  many  States  this  attempt  is 
sustained  by  stringent  legislation  ;  in  some  by  the  use  of 
arbitrary  and  despotic  powers.  In  other  States  the  laws 
are  crude,  loose,  and  easily  evaded.  In  all,  there  is  a 
clamorous  popular  demand  for  more  stringent  legislation, 
in  support  of  which  farmers,  especially,  are  almost  unani- 
mous. 

Before  inquiring  into  the  testimony  of  experience  as  to 
the  practicability  and  effects  of  such  taxation,  let  us  con- 
sider what  is  to  be  said  from  the  theoretic  point  of  view. 
What  is  personal  property  ?  Is  it  desirable,  in  the  inter- 

49 


50  NATURAL    TAXATION. 

est  of  the  whole  community,  that  all  or  any  of  it  should 
be  taxed  ?  Does  reason  indicate  that  it  can  be  fairly  and 
equally  taxed  ? 

§  2.  Taxation  of  credits.  Personal  property  may  be 
divided  into  two  classes  :  chattels  and  credits.  Under 
the  name  of  credits  are  to  be  included,  not  only  book 
accounts,  bills,  notes,  bonds,  mortgages,  bank  deposits, 
and  the  like,  but  also  shares  of  corporate  stock,  and  prob- 
ably shares  in  any  partnership.  "  Our"  chattels,  properly 
speaking,  are  only  those  things  which  we  have  in  our  im- 
mediate custody ;  but  chattels  on  special  deposit  may  be 
included,  since  they  are  in  the  custody  of  our  agents, 
who  have  no  right  to  use  them,,  even  for  a  moment,  for 
their  own  purposes. 

Even  including  chattels  held  in  partnership,  in  the 
class  of  strict  chattels,  it  is  universally  admitted  that, 
in  all  civilized  countries,  credits  form  by  far  the  larger 
portion  of  personal  property.  It  is  easy  to  see  why 
this  is  so.  Credit  may  be  given  for  more  than  two  thirds 
of  the  value  of  both  chattels  and  real  estate,  and  it  is 
continuously  given  to  the  extent  of  at  least  half  the  value 
of  both.  Prof.  H.  D.  McLeod  maintains,  with  tremen- 
dous energy  and  some  ferocity,  that  the  wealth  of  the 
community  is  actually  increased  by  credits,  to  their  full 
amount.  This  is  a  doctrine  dear  to  the  farmer's  heart,  as 
justifying  all  his  favorite  theories  of  taxation.  It  can  be 
easily  tested.  It  would  be  quite  possible  to  form  a  syn- 
dicate in  this  country,  owning  property  readily  salable  for 
two  billion  dollars.  Let  the  syndicate  mortgage  this 
property  for  half  its  market  value.  That  will  add  one 
billion  to  the  national  wealth.  As  loans  might  safely  be 
made  upon  this  mortgage  to  its  full  face  value,  let  A,  the 
first  lender,  hypothecate  it  as  security  for  another  loan  of 
a  billion,  and  B  pledge  it  again  to  C,  C  to  D,  D  to  E,  and 


TAXATION  OF  PERSONAL   PROPERTY.  5  I 

so  on,  until  promissory  notes  are  outstanding  to  the 
amount  of  sixty  billions,  all  secured  by  the  original 
mortgage  for  one  billion.  All  this,  on  the  farmer's  theory, 
is  an  actual  increase  of  national  wealth,  for  every  note  is 
perfectly  good.  The  wealth  of  the  United  States  is 
doubled  in  one  day.  The  philosopher's  stone  and  For- 
tunatus'  purse  are  completely  outdone. 

But  why  confine  ourselves  to  paper  promises?  Is  not 
our  word  as  good  as  our  bond  ?  There  are  more  than  ten 
million  men  in  the  United  States  accustomed  to  business 
of  some  kind.  Let  each  of  them  agree  to  pay  to  his  next 
neighbor  one  million  dollars.  No  writing  is  necessary. 
The  promise  of  No.  I  to  pay  No.  2  will  be  good,  because 
founded  upon  the  promise  of  No.  10,000,000  to  pay  the 
same  amount  to  No.  i.  It  will  cost  them  nothing,  be- 
cause all  their  promises  can  be  literally  fulfilled,  without 
using  a  dollar.  But  (on  the  McLeod-farmer-credit  tax 
theory)  the  United  States  will  increase  its  wealth  by  the 
gigantic  sum  of  ten  million  million  dollars  ($10,000,000,- 
000,000),  all  in  talk.  How  little  knew  the  ancient  sage, 
who  said  :  "  The  talk  of  the  lips  tendeth  only  to  penury." 
(Proverbs,  xiv.,  23.) 

§  3.  Debt  cannot  increase  wealth.  But  what  says 
plain  common-sense?  Debt  cannot  increase  the  general 
stock  of  wealth.  Every  credit  implies  a  debit.  One  gives 
exactly  as  much  as  the  other  gets.  A  loan,  secured  by 
the  pledge  of  a  chattel,  divides  the  equitable  title  to  that 
chattel  between  the  borrower  and  the  lender,  giving  to 
the  lender  the  meat  and  leaving  to  the  borrower  whatever 
may  cling  to  the  bone.  The  mortgage  of  land,  at  common 
law,  transferred  the  actual  ownership  of  the  land  to  the 
mortgagee ;  and  although  equity  has  nominally  altered 
this  rule,  the  bottom  fact  is  that  the  mortgagee  still  has 
the  best  half  of  the  ownership.  He  is  the  real  owner  of 


52  NATURAL    TAXATION. 

the  land,  to  the  extent  of  his  loan  ;  although  he  can  only 
enforce  his  ownership  through  a  sale  of  the  land.  Or,  to 
put  it  in  another  form,  the  title  is  divided  between  the 
mortgagor  and  the  mortgagee :  the  mortgagee  having  the 
cream  and  the  mortgagor  the  skimmed  milk. 

The  same  thing  is  true  concerning  every  form  of  debt. 
Notes  (unsecured  by  pledge  or  mortgage),  book  accounts, 
and  debts  of  every  kind  are  of  no  value  whatever,  except 
so  far  as  they  constitute  a  good  and  readily  enforceable 
claim  against  equivalent  visible,  tangible  things  in  the 
hands  of  the  debtors.  And  to  this  extent  the  property 
in  the  hands  of  the  debtor  really  belongs  to  the  creditor  ; 
although  the  latter  has  no  right  to  select  any  particular 
article  or  to  seize  anything,  until  his  debt  is  due.  If  the 
debt  stands  against  no  tangible  property,  it  is  worthless  ; 
and,  even  under  the  McLeod  theory,  it  would  add  noth- 
ing to  the  general  wealth.  If  it  does  stand  against  such 
property,  it  diminishes  the  general  stock  just  as  much,  by 
its  lien  on  that  property,  as  it  adds  by  its  own  face  value  ; 
and  therefore  it  still  adds  nothing  to  the  general  wealth. 

It  may  be  asked  :  "  Is  not  wealth  in  fact  greatly  in- 
creased by  credit  ?  Does  not  wealth  grow  more  rapidly 
in  a  country  where  credit  is  freely  given,  than  in  one 
where  no  man  will  lend  anything  ?  " 

Certainly.  But  only  because  credit  is  the  instrument 
by  which  capital  is  transferred,  for  a  time,  from  the 
hands  of  the,  men  who  cannot  use  it  most  productively, 
into  hands  of  men  who  can.  The  gain  in  general  wealth 
consists  only  in  the  difference  between  what  such  capital 
will  produce  in  the  hands  of  the  borrower  and  what  it 
would  have  produced  in  the  hands  of  the  lender. 

§  4.  Taxation  of  credit  a  useless  labor.  Considered 
from  the  tax  collector's  point  of  view,  it  may  be  conceded 
that,  as  he  has  a  definite  sum  to  collect,  the  total  burden 


TAXATION  OF  PERSONAL   PROPERTY.  53 

of  taxation  will  neither  be  increased  nor  diminished  by 
any  duplication  or  omission  of  wealth.  It  may,  therefore, 
be  further  conceded  that,  if  all  forms  of  credits  could  be 
effectually  reached  and  taxed,  the  tax  would  simply  be 
divided  among  those  who  divide  the  ownership  of  things, 
and  so  no  injustice  would  be  done.  Assuming,  for  the 
moment,  that  any  form  of  personal  property  ought  to  be 
taxed,  it  may  also  be  assumed  that  the  double  taxation 
involved  in  taxing  credits  would  do  no  harm,  if  they  could 
all  be  reached. 

On  the  other  hand,  what  advantage  is  there  in  doing 
this,  if  it  can  be  done  ?  Why  take  the  trouble  to  collect 
taxes  from  two,  three,  or  four  persons  on  account  of  one 
piece  of  property?  It  increases  the  cost  of  collection 
without  the  slightest  benefit  to  the  State  ;  and  it  confers 
no  benefit  upon  the  taxpayers.  "  The  borrower  is  serv- 
ant to  the  lender."  He  must  eventually  repay  whatever 
tax  the  lender  may  be  compelled  to  pay  upon  the  loan, 
if  the  tax  is  impartially  laid  and  fully  collected,  as  we  are 
now  assuming  that  it  can  and  will  be. 

§  5.  Taxation  of  corporate  credits.  But  it  L,  now 
time  to  inquire  (still  upon  theoretic  grounds)  whether  it 
is  possible  to  collect  taxes  upon  credits  impartially  and 
fully,  or  even  to  approximate  such  a  result.  It  would 
seem  possible  to  ascertain  the  amount  and  value  of  the 
stock  and  bonds  of  domestic  corporations,  especially  of 
railway  companies ;  because  they  can  be  compelled  to 
make  a  full  disclosure  of  their  affairs ;  they  must  keep 
regular  and  full  books  of  accounts ;  and  their  officers 
have  not  usually  such  an  overwhelming  interest  in  their 
finances  as  to  make  them  willing  to  run  great  risks,  merely 
for  the  sake  of  evading  corporate  taxation.  This  is  far 
too  liberal  a  concession  ;  because  immense  blocks  of  shares 
are  now  owned  by  individuals,  who  either  personally  man- 


54  NATURAL  TAXATION. 

age  the  corporations  in  which  they  are  interested,  or  would 
make  it  a  condition  of  the  appointment  of  managers  that 
they  should  commit  whatever  amount  of  perjury  could 
prudently  be  used  for  the  purpose  of  evading  taxes.  It 
is  idle  to  say  that  managers  of  such  easy  consciences  will 
not  be  trusted  with  the  administration  of  great  affairs.  It 
is  notorious  that  bribery,  upon  the  most  extended  scale, 
is  practised  by  the  managers  of  some  corporations,  con- 
ducted otherwise  with  more  than  ordinary  integrity ;  and 
we  are  all  familiar  with  the  story,  undoubtedly  true  in 
substance,  of  the  railway  president  who  told  all  the  other 
members  of  a  presidents'  conference  that  he  would  take 
the  word  of  any  of  them,  as  a  gentleman,  for  a  million 
dollars,  but  as  a  railway  officer,  not  for  a  cent. 

Assuming,  however,  that  the  direct  taxation  of  corpora- 
tions could  be  successfully  enforced,  this  could  only  be 
done  in  those  States  in  which  their  business  is  and  must 
be  carried  on.  The  stock  and  bonds  of  a  New  Jersey 
corporation  are  often  owned  entirely  in  New  York  ;  but 
in  nearly  all  cases  they  can  only  be  taxed  in  New  Jersey. 
If  the  corporate  property  is  situated  in  New  Jersey,  the 
same  result  would  be  secured  by  taxing  the  property 
itself.  If  that  is  done,  the  stock  and  bonds  should  be 
exempted  ;  or,  if  they  are  taxed,  the  visible  chattels  and 
real  estate  of  the  corporation  should  be  exempted.  Is 
not  the  natural  and  sensible  method  to  tax  tilings  and 
exempt  stock  ? 

The  Federal  Constitution  stands  in  the  way  of  taxing 
corporate  bonds,  by  confining  local  taxation  to  bonds  held 
by  citizens  or  residents  of  the  taxing  State.1  If  such  taxa- 
tion became  heavy,  it  would  soon  be  found  that  all  bonds 
were  held  outside  of  the  State  in  which  the  corporate 
office  was  situated. 

foreign-held  Bonds,  15  Wallace,  300. 


TAXATION  OF  PERSONAL   PROPERTY.  55 

The  ingenuity  of  corporations  in  evading  taxation,  even 
now,  is  well  known.  Is  it  supposable  that,  under  a  much 
heavier  rate  of  taxation,  such  as  must  follow  the  abolition 
of  all  indirect  taxation,  this  ingenuity  would  fail  to  put 
corporations  upon  an  equal  footing  with  individuals?  If 
it  did  fail,  the  burden  would  become  so  heavy  that  the 
number  of  corporations  would  rapidly  diminish  ;  and  the 
revenue  from  this  source  would  fall  off  accordingly. 

§  6.  Taxation  of  individual  credits.  Turning  now  to 
the  case  of  individuals,  it  is  certain  that  a  very  large 
majority  keep  no  detailed  account  of  their  property  or 
income,  and  that  a  majority  of  those  who  do  would  cease 
to  do  so,  if  by  that  means  only  they  could  avoid  excessive 
taxation.  Let  us  therefore  inquire  how  heavy  the  gen- 
eral property  tax  would  probably  be,  if  there  were  no 
other  taxes. 

Assuming  that  property  to  the  nominal  value  of  $250 
and  the  real  value  of  $500  would  be  exempt,  as  it 
certainly  would,  and  that  all  citizens  handed  in  true 
lists  of  their  property,  as  they  certainly  would  not,  not 
more  than  2,500,000  of  the  12,500,000  families  in  the 
United  States  would  have  personal  property  of  sufficient 
value  to  subject  them  to  direct  taxation.  Reckoning  the 
total  wealth  of  the  country  at  $60,000,000,000,  including 
the  value  of  land,  but  allowing  for  inevitable  exemptions 
in  favor  of  poverty,  of  public  property,  charities,  etc.,  and 
for  the  low  rates  at  which  property  must  always  be  assessed 
(say,  at  the  utmost,  80  per  cent,  of  its  full  value),  the  rriost 
honest  and  rigid  assessment  would  fail  to  reach  more  than 
$40,000,000,000  of  property. 

As  the  federal  and  local  taxes  together  exceed 
$850,000,000  per  annum,  the  general  property  tax,  if 
adopted  as  the  only  tax,  would  exceed  2  per  cent,  upon 
capital,  even  if  there  were  no  considerable  evasion  of 


56  NATURAL    TAXATION. 

taxes.  This  would  be  equivalent  to  a  tax  of  more  than 
one  third  of  the  income  of  all  capital. 

Call  the  tax  only  one  third  of  the  income  from  capital ; 
and  would  not  such  a  rate  offer  ample  inducement  for 
evasion  ?  It  has  been  found  by  experience  that  half  this 
rate  has  sufficed  to  drive  several  hundred  millions  of 
wealth  out  of  Boston  and  other  cities ;  while  under  a  two 
per  cent,  rate  in  New  York,  personal  property  has  become 
almost  invisible.  It  is  manifest  that  practically  all 
owners  of  credits  would  use  their  utmost  efforts  to  con- 
ceal them  from  the  assessor.  Those  who  would  not  take 
a  false  oath  would  simply  make  no  returns,  submitting  to 
any  arbitrary  tax  which  might  be  imposed  upon  them. 
Others  would,  in  the  vast  majority  of  cases,  make  a  false 
return.  Some,  knowing  that  the  assessor  would  not  be- 
lieve them,  if  they  denied  the  possession  of  any  credits, 
would  admit  a  part  of  their  holdings ;  others  would  deny 
them  altogether. 

Thus  the  amount  of  taxable  property  discovered  by  the 
assessor  would  be  further  decreased ;  and,  as  the  same 
amount  of  taxes  must  still  be  collected,  the  rate  would  rise 
to  3  per  cent.  This  would  make  it  simply  impossible  for 
strictly  honest  persons  to  hold  credits  at  all,  unless  by 
their  gradual  withdrawal  from  the  loan  market  the  rate 
of  interest  should  be  increased  to  an  amount  equal  to  the 
additional  tax.  The  more  probable  result  would  be  to 
throw  all  such  securities  into  the  hands  of  less  scrupulous 
persons ;  who,  partly  by  a  free  use  of  perjury,  and  partly 
by  an  outward  show  of  poverty,  would  blind  the  eyes  of 
the  most  incorruptible  assessors.  Add  to  all  this  the 
possibility  of  corruptible  assessors  ;  and  the  field  for  eva- 
sion is  enormously  extended. 

We  may  therefore  safely  conclude  that  by  far  the  larger 
part  of  all  credits  would  escape  from  taxation,  that  strictly 


TAXATION   OF  PERSONAL  PROPERTY.  57 

honest  holders  would  pay  an  outrageously  disproportion- 
ate share  of  the  taxes,  the  timidly  dishonest  or  highly 
ingenious  a  moderate  tax,  and  the  utterly  unscrupulous 
practically  none  at  all. 

§  7.  Taxation  of  money.  Money,  which  is  the  one 
thing  above  all  others  which  farmers  desire  to  tax,  is  the 
very  thing  which,  above  all  others,  ought  not  to  be  taxed. 
A  really  effective  and  uniform  system  of  taxing  money 
would  ruin  every  farmer  in  the  country. 

Money  is  as  important  to  the  prosperity  of  the  commu- 
nity as  blood  is  to  the  life  of  the  individual.  Taxation 
tends  to  drive  money  out  of  the  State  ;  and,  if  any  success- 
ful method  of  taxing  all  coin  and  other  money  could  be  put 
in  operation,  all  money  would  be  driven  out  of  circula- 
tion ;  and  a  frightful  prostration  of  business  would  ensue; 
in  which  none  would  suffer  more  than  the  farmers. 
Farmers  always  want  to  get  high  prices  for  their  products ; 
and  no  more  effective  scheme  could  be  devised  for  cutting 
down  the  prices  of  those  products  to  the  lowest  point, 
than  a  tax  which  should  really  reach  every  dollar  of 
money  in  the  State. 

Under  the  name  of  money,  legislatures  seek  to  tax : 

1.  Deposits  in  banks; 

2.  Treasury  notes  and  bank  notes; 

3.  Gold  and  silver  coins. 

§  8.  Bank  deposits.  Bank  deposits  are  not  money, 
in  any  sense  whatever.  Nobody  owns  any  money  on  de- 
posit, unless  it  is  a  special  deposit,  in  a  separate  bag  or 
box.  No  bank  accepts  such  a  deposit,  unless  it  is  well 
paid  for  the  trouble  and  risk.  That  is  the  business  of 
safe-deposit  companies ;  it  is  no  part  of  a  banking  busi- 
ness. Bank  deposits  are  mere  credits,  like  any  other  loan, 
payable  on  demand.  No  bank  ever  keeps  on  hand  an 
amount  of  coin  or  notes  equal  to  its  deposits ;  which 


58  NATURAL    TAXATION. 

proves  that  the  depositors  cannot  possibly  have  "  money 
on  deposit,"  since  the  money  is  never  there  to  be  had. 
Every  reason  for  not  taxing  credits  applies  to  bank  de- 
posits. But  in  addition  to  those  reasons,  success  in  taxing 
deposits  would  destroy  the  whole  banking  system  and 
paralyze  commerce,  by  compelling  all  exchanges  to  be 
settled  in  coin  or  bank  notes,  which  are  entirely  insuffi- 
cient for  one  tenth  of  commercial  transactions. 

§  9.  Paper  money.  So  far  as  what  is  called  money 
consists  of  paper,  it  is  very  clear  that  all  this  paper  is 
mere  evidence  of  debt.  Treasury  notes  represent  a  debt 
of  the  United  States ;  and  bank  notes  represent  debts  of 
the  banks.  If  the  property  which  is  represented  by  these 
notes  is  taxed,  it  ought  not  to  be  taxed  a  second  time  by 
taxing  the  notes  themselves.  If  that  property  is  not 
taxed,  this  only  proves  that  the  legislature,  with  the 
strongest  desire  to  do  so,  has  never  been  able  to  invent 
any  method  by  which  it  could  tax  visible  property  ;  and 
if  the  legislature  is  not  able  to  find  and  tax  the  houses, 
merchandise,  food,  and  furniture,  against  which  these 
notes  were  issued,  these  being  things  which  cannot  be  put 
out  of  sight,  how  absurd  it  is  to  try  to  tax  the  notes  them- 
selves, which  can  so  easily  be  put  out  of  sight. 

§  10.  Coin.  Coin,  like  all  other  money,  is  nothing 
but  a  representative  of  wealth,  an  order  for  wealth,  which 
everybody  honors  ;  but  not  wealth  itself. 

Gold  or  silver  coin  is  of  no  earthly  use,  except  for  the 
purpose  of  exchanging  one  kind  of  merchandise  for  an- 
other. Nobody  can  eat  coins,  or  wear  coins,  or  build  a 
house  with  coins,  or  even  make  a  piece  of  plate  with 
coins,  or,  in  short,  put  them  to  any  use  of  any  kind 
whatever,  so  long  as  he  keeps  them  in  coin.  The  only  pur- 
pose for  which  money  is  good  at  all  is  the  purpose  of 
getting  rid  of  it,  as  quickly  as  possible,  for  something 


TAXATION  OF  PERSONAL   PROPERTY.  59 

more  practically  useful.  Accordingly,  no  man,  who 
is  not  partially  insane,  habitually  carries  any  large 
amount  of  money  with  him,  or  keeps  it  in  his 
house.  The  very  richest  men  have  the  least  amount 
of  money.  A  well-known  citizen  of  New  York,  who 
is  reputed  to  be  worth  $50,000,000,  never  possesses 
so  much  as  $5  in  actual  money,  if  he  can  help  it. 
He  is  supposed  to  have  a  large  amount  of  money  in  banks, 
but  he  does  not  have  a  dollar  of  his  own  in  any  bank. 
All  which  he  has  is  the  promise  of  banks  to  pay  a  large 
sum  to  him,  whenever  he  wants  it ;  but,  as  a  matter  of 
fact,  he  never  does  want  it,  for  his  own  personal  use,  and 
never  takes  possession  of  it.  He  only  orders  it  to  be  paid 
to  other  people. 

These  views  are  supported  by  the  Ohio  Tax  Commis- 
sion of  1893.  They  say:  " As  to  money,  there  is  much 
reason  for  saying  it  is  a  mere  tool,  and  that  it  should  not 
be  taxed  at  all.  .  .  .  Money  is,  after  all,  in  almost  all 
of  its  forms,  a  mere  credit."  ] 

It  is  a  striking  illustration  of  the  total  failure  of  reason- 
ing power,  in  a  majority  of  intelligent  human  beings,  that 
the  popular  demand  for  more  rigid  taxation  of  money 
proceeds  exclusively  from  that  class  of  the  people  (mostly 
farmers  and  their  associates)  who  at  the  same  time  most 
clamorously  demand  the  issue  of  more  money.  Millions 
of  voters  demand,  in  the  same  breath,  that  money  shall 
be  issued  in  such  quantities  as  to  reduce  the  rate  of  inter- 
est to  2  per  cent,  and  that  the  same  money  shall  be  taxed 
2J-  per  cent.  More  than  this,  they  insist  that  the  men  to 
whom  they  give  their  promissory  notes  for  money  lent 
shall  be  taxed  2^-  per  cent,  on  the  notes,  while  they  them- 
selves shall  be  taxed  2\  per  cent,  on  the  money.  In  short, 
they  want  the  price  of  money  reduced  to  2  per  cent,  and 

1  Report  Ohio  Com.,  p.  65. 


60  NATURAL    TAXATION. 

yet  to  bear  a  tax  pf  5  per  cent.  Thus  the  State  would, 
if  they  could  have  their  way,  collect  $5  out  of  every  $2  ; 
an  income  tax  of  250  percent. 

§  II.  Taxation  of  banks.  The  capital  of  incorporated 
banks  is  the  one  brilliant  exception  to  the  general  failure 
of  the  personal-property  tax.  After  many  unsuccessful 
experiments,  the  State  authorities  finally  devised  a  plan 
for  taxing  the  shareholders  of  such  capital,  upon  the  value 
of  their  shares  ;  and  this  tax  is  fairly  assessed  and  effectu- 
ally collected,  with  certain  exceptions  not  necessary  to  be 
stated.  The  essential  features  of  this  plan  are  that  the 
tax  is  laid  upon  the  shareholders,  not  upon  the  banks, 
while  it  is  paid  by  the  banks  and  collected  by  them  from 
the  shareholders.  Incorporated  banks  are  always  subject 
to  rigid  governmental  inspection  ;  and  therefore  it  is  im- 
possible for  them  entirely  to  conceal  the  value  of  their 
assets  from  the  government.  Their  entire  business  de- 
pends upon  their  credit ;  and  their  credit  cannot  be  sus- 
tained without  regular  public  reports  of  their  financial 
condition.  Thus  the  value  of  their  stock  is  a  matter  of 
general  knowledge  ;  and,  as  a  rule,  it  is  estimated  too 
high  rather  than  too  low.  If,  for  the  sake  of  evading 
taxation,  the  officers  of  a  bank  should  contrive  to  de- 
preciate the  nominal  market  value  of  its  stock,  they  would 
certainly  lose  more  business  than  the  saving  of  taxes  would 
be  worth,  and  they  might  lose  their  clientage  altogether. 

Banks  are  thus  more  effectively  taxed  than  any  other 
form  of  personal  property.  But  is  the  result  profitable  to 
the  people  who  lay  the  taxes  ?  A  little  reflection  will 
show  that  it  is  singularly  disastrous.  The  success  of  the 
tax  on  banks  is  the  chief  source  of  American  currency 
troubles. 

§  12.  The  currency  problem.  The  widespread  demand 
for  more  currency,  which  is  so  often  treated  with  contempt 


TAXATION  OF  PERSONAL  PROPERTY.  6 1 

by  financiers,  is  at  its  foundation  perfectly  reasonable 
and  natural  ;  although  every  form  of  relief,  which  has 
thus  far  been  demanded,  would  be  ineffectual ;  while  all 
that  has  thus  far  been  done,  in  compliance  with  this  de- 
mand, has  brought  ruin,  instead  of  relief.  The  greenback 
craze,  the  demand  for  "  free  banking,"  meaning  only  the 
unlimited  issue  of  bank  notes,  the  silver  mania,  the  2 
per  cent,  sub-treasury  scheme,  and  all  other  proposals  for 
an  enormous  expansion  of  the  currency,  arise  from  a  com- 
mon and  permanent  cause.  The  uneducated  masses  are 
not  to  be  condemned  for  seeking  relief  in  wrong  direc- 
tions, so  long  as  the  educated  classes  do  not  offer  relief  in 
any  direction. 

It  is  perfectly  true,  as  alleged  by  the  advocates  of  in- 
flation, that  there  is  not  money  enough  to  do  the  business 
of  the  country.  But  it  is  also  true  that  there  never  can  be 
money  enough  to  do  tJie  business  of  the  country.  It  can  no 
more  be  done  with  fifty  dollars  per  capita  than  with  five.  It 
must  be  done  by  barter,  by  book  accounts,  or  by  banking. 
As  a  matter  of  fact,  it  is  done  by  a  species  of  banking. 
But  the  banks  of  the  South  and  Southwest  are  mainly 
cross-road  grocery  stores.  Here,  nine  tenths  of  the  farm- 
ers' and  planters'  produce  are  settled  for.  No  matter  to 
whom  the  products  are  sold,  the  producers  get  their  pay 
only  in  trade  at  the  village  grocery.  The  process  is  as 
truly  one  of  banking  as  is  any  transaction  in  a  national 
bank  of  New  York  or  Chicago.  But  it  is  enormously  ex- 
pensive, clumsy,  risky,  and  unsatisfactory.  Precisely  the 
same  transaction  which,  in  a  large  city,  would  cost  the 
farmer  less  than  2j  per  cent.,  costs  him,  at  his  village 
store,  20  to  25  per  cent.  Yet  the  clumsiness  of  the  village 
transaction  is  so  great  that  the  storekeeper  does  not,  in 
the  long  run,  make  any  remarkable  profit  from  this  enor- 
mous commission. 


62  NATURAL    TAXATION. 

Why  is  this  ?  Because  there  are  no  regular  banks, 
within  the  reach  of  the  farmer.  But  why  are  there  no 
such  banks  ?  Simply  because  the  farmer  himself  has  taxed 
them  out  of  existence.  Or,  more  accurately,  because  his 
beloved  system  of  taxation  has  made  it  impossible  for 
good  banks  to  come  into  existence  in  his  neighborhood. 
The  real  business  of  a  bank  is  to  enable  goods  to  be  ex- 
changed, without  the  use  of  any  money.  Issuing  notes  is 
not  at  all  essential  to  a  banking  business.  But  the  strictly 
regular  business  of  a  bank  cannot  be  carried  on,  in  a 
purely  farming  district,  under  the  burden  of  local  taxa- 
tion. There  is  not  enough  profit  in  it  to  pay  the  tax.  In 
Canada  and  Scotland,  where  banks  pay  no  local  taxes, 
every  little  village  has  a  branch  bank,  supported  by  the 
wealthy  bank  of  some  large  city.  In  the  United  States, 
where  all  banks  are  heavily  taxed,  there  are  not  one  fifth 
of  the  number  necessary  to  supply  the  demand  ;  and  as  no 
branches  are  allowed,  most  of  the  country  banks  are  not 
thoroughly  safe.  In  Canada  and  Scotland  there  is  no 
currency  question.  Nobody  wants  greenbacks  or  sub- 
treasuries,  or  cares  anything  about  bimetallism.  In  the 
United  States  we  hardly  think  about  anything  else. 

The  moral  is  plain.  Abolish  taxation  on  personal  prop- 
erty, including  all  taxes  on  banks,  allow  branch  banks  to 
be  set  up  everywhere,  and  the  currency  question  will 
settle  itself. 

§  13.  Taxation  of  visible  chattels.  Some  writers  on 
the  subject,  who  fully  admit  that  invisible  and  intangible 
personal  property  ought  not  to  be  taxed,  nevertheless  in- 
sist that  everything  should  be  taxed,  which  can  be  seen 
and  touched.  They  see  clearly  that  mortgages  represent 
real  estate  ;  that  promissory  notes  and  book-debts  repre- 
sent the  cloth,  groceries,  metals,  or  the  like,  for  which  they 
are  given  ;  that  the  stock  of  a  railway  company  represents 


TAXATION-  OF  PERSONAL   PROPERTY.  63 

the  railway  and  its  equipment,  and  that  there  is  no  sense 
or  justice  in  taxing  both  the  things  which  are  represented 
and  the  pieces  of  paper  which  represent  them.  They 
see,  too,  that  bonds,  notes,  and  money  can  be  hidden,  and 
that  any  attempts  to  tax  them  must  result  in  doubling 
the  burden  of  simplicity  and  honesty  and  exempting 
shrewdness  and  roguery.  But  they  insist  that  all  such 
personal  property  as  can  be  seen  and  handled,  and  cannot 
easily  be  concealed,  ought  to  bear  its  share  of  taxation, 
and  that  it  can  be  reached,  effectually  and  equally. 

Let  us  first  consider  what  articles  of  personal  property 
can  be  seen  and  touched,  so  as  to  be  reached  by  faithful 
assessors.  The  results  of  actual  assessments,  in  States 
which  adopt  stringent  methods  of  personal  taxation,  show 
that  these  "  visible  and  tangible  things  "  are  principally 
animals,  stock  on  hand  of  merchants  and  manufacturers, 
household  furniture,  farm  implements  and  carriages,  in 
the  order  named.  As  the  only  reason  for  taxing  these 
things,  while  letting  invisible  property  pass,  is  that  the 
assessment  of  invisible  property  must  depend  upon  the 
oath  of  the  taxpayer,  we  must  inquire  how  far  these 
visible  articles  can  be  fairly  reached  and  valued  by  assess- 
ors, without  depending  upon  the  statements  of  their 
owners. 

§  14.  Farmers  hold  most  visible  chattels.  Judged 
by  this  standard,  it  is  manifest  that  the  property  of  farm- 
ers would  be  more  easily  reached  and  more  accurately 
valued  by  honest  assessors,  than  would  be  the  property 
of  any  other  class.  For  farm  animals  and  implements  are 
always  readily  open  to  inspection.  Their  value  is  gener- 
ally nearly  uniform.  Most  farmers,  in  the  same  county, 
pay  about  the  same  prices  for  their  horses,  cattle,  plows, 
tools,  and  furniture.  A  few  own  highly  expensive  cattle ; 
and  these  will  escape  full  assessment,  just  as  other  chat- 


64  NATURAL    TAXATION. 

tels  of  very  rich  people  will,  in  any  line  of  business.  But 
the  mass  of  farmers  own  things  which  their  neighbors  can 
value  easily.  Very  different  is  the  case  of  merchants. 
What  assessor,  however  honest  and  competent,  can  per- 
sonally value  all  the  stock  of  even  one  grocery  store,  not 
to  say  the  stock  of  all  the  stores  in  his  district?  Fancy 
an  assessor  making  a  personal  appraisal  of  the  stock  of 
fifty  drug  stores,  a  hundred  dry-goods  stores  and  as  many 
grocery  stores.  In  every  large  store,  there  are  hundreds 
of  different  articles,  at  different  prices,  by  the  yard  or  the 
pound  or  the  gallon.  Bales  of  goods  lie  side  by  side  ;  some 
worth  four  cents  a  yard,  some  ten  cents,  some  two  dollars. 
The  difference  between  goods  worth  one  dollar  a  yard 
and  those  worth  two  dollars  is  often  imperceptible  to  the 
eye  of  any  one  but  an  expert.  But  how  can  an  assessor 
have  time  to  open  all  these  bales,  to  look  at  them,  much 
less  judge  accurately  of  their  value  ?  All  the  assessors 
of  New  York  City  could  not  approximately  value  Claf- 
lin's  stock  alone,  without  relying  upon  the  word  of 
Claflin's  clerks.  Therefore  the  stock  of  merchants  and 
manufacturers  would  be  assessed  upon  the  valuation  given 
by  themselves  ;  as,  in  fact,  it  is  now.  Thus  the  assess- 
ment of  "  visible  and  tangible  property,"  in  these  impor- 
tant cases,  is  made  and  must  be  made  in  exactly  the 
same  manner  as  the  assessment  of  bonds,  notes,  and  other 
invisible  property,  resulting  in  a  double  or  treble  burden 
upon  the  simple  and  truthful,  as  compared  with  their  un- 
scrupulous neighbors. 

The  same  thing  is  true  as  to  household  furniture. 
Farmers  have  a  certain  average  quality  of  furniture,  the 
value  of  which  can  be  ascertained  far  more  nearly  than 
the  value  of  that  of  well-to-do  city  residents.  In  pro- 
portion to  the  wealth  of  the  taxpayer,  would  be  the 
failure  of  the  most  honest  assessor  to  estimate  the  true 


TAXATION   OF  PERSONAL  PROPERTY.  65 

value  of  his  property.  Anybody  can  estimate  the  value 
of  a  two-dollar  chair  ;  but  few  indeed  can  tell  the  dif- 
ference between  a  chair  costing  fifty  dollars  and  another 
costing  one  hundred  and  fifty.  To  many  assessors  there 
would  be  no  apparent  difference  in  value  ;  to  none  would 
the  fair  difference  seem  to  be  more  than  twenty  dollars  or 
thereabouts.  In  many  household  articles,  such  as  bed- 
ding, for  example,  a  difference  of  200  percent,  in  cost  is  at- 
tended with  no  outside  indications.  Many  honest  assessors 
would  reckon  the  value  of  a  $15,000  set  of  furniture  as  no 
greater  than  that  of  a  set  costing  less  than  half  the  price. 

§  15.  Assessment  of  merchandise.  Let  us,  however, 
imagine  a  sustained  and  general  attempt  to  appraise 
visible  chattels  by  public  officers.  How  can  that  vast 
mass  of  visible  chattels,  known  under  the  general  name  of 
merchandise,  and  which  is  obviously  that  which  the 
advocates  of  chattel  taxation  are  most  anxious  to  reach, 
be  fairly,  equally,  and  effectually  taxed?  In  the  first 
place,  they  must  be  appraised,  all  over  the  United  States, 
on  the  same  day.  Merchandise  is  constantly  changing 
its  ownership  and  constantly  changing  its  situation.  A 
bale  of  cloth,  for  example,  manufactured  in  Lowell,  is 
sent,  unbroken,  to  New  York,  and  there  divided  among 
buyers  from  Cleveland,  Indianapolis,  Chicago,  Milwaukee, 
Minneapolis,  Des  Moines,  Omaha,  and  Denver.  Thus 
the  title  to  this  one  parcel  of  goods  passes  through  ten 
different  owners,  residing  in  ten  different  States,  each  of 
which  has  its  own  appointed  day  of  assessment  for  pur- 
poses of  taxation.  Under  a  system  of  assessment,  exe- 
cuted by  public  officials,  without  depending  upon  the  false 
returns  of  interested  taxpayers,  it  would  certainly  hap- 
pen, in  many  cases,  that  the  cloth  would  be  taxed  once  in 
Lowell,  taxed  again  in  New  York,  taxed  again  in  each  of 
the  cities  to  which  it  was  next  sold,  and  taxed  once  more 


66  NATURAL  TAXATION. 

in  the  retail  stores  of  the  country  districts  where  it  would 
be  finally  sold  for  actual  use.  This  would  make  four 
taxes  upon  one  thing.  Side  by  side  with  cloth  thus 
taxed  will  be  found  other  cloth,  of  precisely  the  same 
quality  and  make,  which  had  luckily  been  started  on  its 
way  from  Lowell  before  Lowell's  assessment  day,  slipped 
through  New  York  and  Chicago  before  their  assessment 
days,  and  finally  received  by  the  country  dealer  just  after 
his  assessment  day.  At  the  present  average  rate  of  taxa- 
tion, the  country  dealer  who  was  clever  enough  thus  to 
escape  the  various  local  taxes  would  have  an  advantage 
of  8  or  10  per  cent,  over  his  less  ingenious  neighbor. 
All  dealers  who  paid  the  tax  on  their  goods  would  thus 
be  driven  out  of  business  by  the  competition  of  those 
who  did  not. 

§  16.  Work  for  assessment  day.  Let  us  imagine, 
then,  that  the  States  all  agree  upon  one  day  for  assess- 
ment. The  first  of  April,  which  is  the  day  selected  in 
some  places,  is  decidedly  the  most  appropriate  day  for 
this  purpose.  On  that  day,  all  over  the  country,  a  swarm 
of  assessors  must  besiege  the  factories,  mills,  shops,  and 
stores,  taking  an  honest  valuation  of  all  merchandise  on 
hand.  The  valuation  must  be  completed  in  one  day. 
Otherwise,  Smith's  valuation  being  completed  on  April  1st, 
while  Jones  is  left  to  April  2d,  there  would  be  a  midnight 
exodus  of  easily  portable  goods  from  Jones  to  Smith,  so 
that  the  assessor  should  find  little  value  in  charge  of 
Jones  on  April  2d.  No  help  must  be  asked  in  the  work 
of  valuation  from  the  owners  or  their  employees  ;  for  if 
that  is  done,  the  assessor  might  just  as  well  accept  the 
sworn  returns  of  the  owners,  as  is  done  now,  with  most 
ludicrous  and  iniquitous  results.  As  it  is  well  known  to 
be  an  impossibility  for  the  owners  themselves  to  make 
such  a  valuation  in  one  day,  even  with  the  aid  of  all  their 


TAXATION'  OF  PERSONAL   PROPERTY.  67 

clerks,  there  must  be  a  number  of  official  assessors  em- 
ployed, exceeding  all  the  number  of  persons  employed  in 
holding  and  selling  merchandise.  The  work  might,  how- 
ever, by  extreme  diligence,  be  done  in  a  rough  way  by 
two  million  local  assessors.  As  it  would  take  them  at 
least  one  day  to  receive  instructions  and  two  days  to 
tabulate  their  returns,  besides  the  one  day  occupied  in 
valuing,  each  would  serve  at  the  very  least  for  four  days. 
If  they  were  paid  less  than  $5  per  day,  on  an  average, 
their  services  would  be  worthless.  The  lowest  cost  of 
such  an  assessment  would  therefore  be  $40,000,000. 

§  17.  Vanishing  merchandise.  On  "  assessment  day  " 
there  would  be  universal  concealment  of  all  articles  of 
small  bulk  and  great  value.  Watches,  jewels,  gold,  money 
of  all  kinds,  and  all  concealable  things  would  vanish  from 
sight.  Men  would  walk  about  stuffed  with  valuables.  Old 
stoves,  pots,  and  pans  would  be  filled  with  money  and 
jewels.  Valuable  goods,  which  could  not  be  hidden, 
would  be  covered  with  dust  or  otherwise  made  to  look 
almost  worthless.  In  every  mill  and  factory  manufactures 
would  be  kept  in  an  unfinished  state,  as  far  as  possible, 
until  assessment  day  had  passed.  A  thousand  devices 
would  be  resorted  to,  in  order  to  reduce  the  apparent 
value  of  the  things  which  the  assessor  would  inspect,  or 
to  prevent  him  from  seeing  them  at  all. 

In  order  to  make  this  plan  of  official  valuations  success- 
ful, the  assessors  must  enter  every  room  in  every  house, 
and  strip  naked  every  man  and  woman  whom  they  sus- 
pect of  concealing  taxable  property.  This  is  the  method 
by  which  tariffs  on  imports  are  executed  ;  and  it  is  the 
only  way  in  which  visible,  tangible  personal  property  ever 
was  or  ever  can  be  fairly,  equally,  and  effectually  taxed. 

Americans,  boasting  loudly  of  their  freedom  and  per- 
sonal dignity,  do  submit  to  all  these  outrages,  under  the 


68  NATURAL    TAXATION. 

tariff  and  excise  system  ;  and  only  a  few  moonshiners  in 
Southern  States  resent  them.  The  whole  system  of  in- 
direct taxation  is  enforced  by  the  violation  of  all  privacy, 
decency,  and  natural  rights.  Everybody  is  presumed,  by 
our  tariff  and  excise  laws,  to  be  a  thief  and  a  liar  ;  and 
everybody  who  comes  under  the  operation  of  those  laws 
is  actually  treated  as  such.  But,  meek  and  spiritless  as 
the  residents  of  American  cities  have  shown  themselves 
under  corrupt  and  brutal  police,  and  indifferent  as  all 
Americans  have  shown  themselves  to  innumerable  forms 
of  plunder,  carried  on  under  the  pretense  of  collecting 
indirect  taxes,  is  it  probable  that  they  would  submit  to 
the  universal  application  of  these  methods,  under  direct 
local  taxation  ?  Would  they  long  submit  to  have  their 
beds  searched  for  concealed  money  and  their  wives  stripped 
to  discover  concealed  jewelry,  as  is  now  done  by  custom- 
house officers  ? 

And,  when  all  this  was  done,  the  system  would  none  the 
less  fail.  The  official  valuation  of  visible  chattels  could 
not  be  completed  within  ten  days  ;  and  it  would  therefore 
be  successfully  evaded.  It  could  not  be  made  even  ap- 
proximately correct.  Every  article  would  be  valued  very 
much  too  high  or  very  much  too  low.  Nor  would  the 
average  produce  any  fair  result.  The  goods  of  Jones 
would  be  appraised  at  twice  their  real  value  ;  while  the 
goods  of  Smith  would  be  appraised  at  nearly  their  value, 
and  the  goods  of  Brown  at  half  their  value.  Jones  would 
thus  be  cheated  heavily,  Smith  moderately,  for  the  sole 
benefit  of  Brown. 

The  fact  is  that  all  systems  of  assessing  personal  prop- 
erty are  about  equally  bad.  Probably  the  nearest  ap- 
proach to  a  fair  assessment  would  be  reached  by  requiring 
every  citizen  to  make  a  return  for  his  next  neighbor. 


TAXATION  OF  PERSONAL   PROPERTY.  69 

Such  a  system  would  be  as  absurd  as  an  old-fashioned 
donkey  race,  in  which  each  man  rides  a  competitor's  don- 
key, and  the  last  donkey  wins.  But,  like  such  a  race,  it 
might  work  out  rough  justice — very  rough,  it  is  true,  but 
not  so  bad  as  the  results  of  any  system  now  in  use.1 

1  While  these  pages  were  going  to  press,  the  writer  discovered  that  this 
very  method  had  been  tried  in  Rhode  Island,  a  hundred  years  ago,  with  only 
the  difference  that  each  assessment  was  to  be  made  by  ten  neighbors.  And 
the  Romans  (A.D.  300-800)  had  an  even  more  effective  plan.  They  com- 
pelled the  assessor  to  pay  all  the  taxes  which  could  not  be  collected  from,  Iiis 
neighbors  !  And  yet  both  Rome  and  Rhode  Island  failed  to  make  their 
systems  work. 


CHAPTER   V. 
TESTIMONY  OF  EXPERIENCE. 

§  I.  Personalty  taxes  in  history.  It  is  time  to  test 
these  theories  by  actual  experience.  European  govern- 
ments, for  several  centuries,  persisted  in  the  effort  to  ap- 
praise and  tax  all  classes  of  property,  real  and  personal, 
upon  an  equal  footing.  The  ancient  tax-rolls  of  England 
enumerate  the  precise  number  and  value  of  the  beds, 
tables,  chairs,  pots,  and  pans  of  each  taxpayer.1  The  En- 
glish tax,  now  called  the  land  tax,  imposed  in  the  seven- 
teenth century,  was  in  fact  originally  a  tax  upon  all  real 
and  personal  property.  As  late  as  1827,  a  trifling  amount 
of  personal  property  was  assessed  and  taxed  under  this 
law.  The  only  reason  why  such  property  dropped  out  of 
the  assessment  rolls  was  that  it  became  increasingly  im- 
possible to  reach  it.  Practically,  it  dropped  out  at  a  very 
early  day.  A  similar  experience  in  all  Europe  led  to 
similar  results  ;  and  the  attempt  to  assess  personal  prop- 
erty, whether  visible  or  invisible,  otherwise  than  by  means 
of  an  income  tax,  has  been  universally  abandoned. 

But  the  citizens  of  our  own  favored  land,  confident  in 
the  power  of  the  American  eagle  and  of  republican  in- 
stitutions, despise  the  teachings  of  European  experience 
and  resolutely  persist  in  the  taxation  of  personal  property. 
They  have  achieved  a  certain  measure  of  success.  The 
official  assessors  estimate  that  they  have  reached  nearly 

1  Dowell's  Hist.   Taxation,  59-74 ;  232-235. 
70 


TESTIMONY  OF  EXPERIENCE.  /I 

60  per  cent,  of  such  property  in  New  England,  50  per  cent, 
in  some  Western  States  and  15  per  cent,  in  New  York.  If 
by  ""personal  property"  only  visible  chattels  were  in- 
tended, this  estimate  may  be  correct.  But  as  this  is  not 
intended,  the  estimate  is  excessive.  In  no  large  State 
does  the  assessed  value  of  personal  property  materially 
exceed  half  the  assessed  value  of  real  estate,  or  amount 
to  one  third  of  its  actual  value.  In  some  States  (Ala- 
bama, for  example)  the  roll  of  personalty  is  swelled  by 
including  in  it  all  railway  values.  But  it  is  everywhere 
conceded  that  personalty,  if  defined  as  including  all  forms 
of  liens  and  loans,  fully  equals  realty  in  value.  It  would 
be  strange  if  it  did  not  ;  because  such  a  definition  in- 
cludes all  chattels,  all  debts  incurred  in  the  purchase  of 
chattels,  and  all  debts  which  are  made  a  charge  upon  land. 
This  is  the  value  which  our  legislators  strive  to  tax  ;  and 
it  would  be  too  liberal  to  allow  that  they  reach  one  third 
of  it  anywhere. 

Long  study  of  all  accessible  statistics  has  convinced  the 
writer  that  the  average  market  value  of  improved  land,  ir- 
respective of  improvements,  is  almost  exactly  equal  to  the 
value  of  all  improvements  affixed  to  it,  that  the  value  of 
actual  visible  chattels  is  about  the  same,  and  that  the  value 
of  unimproved  land  is  about  half  as  much.  In  other 
words,  dividing  salable  property  into  seven  equal  parts, 
land  would  represent  three  sevenths,  improvements  on 
land  two  sevenths  and  chattels  two  sevenths.  This  ap- 
pears to  be  the  fact  in  every  civilized  country  ;  and  the 
reason,  in  part,  may  be  readily  discerned.  The  "  value  of 
land  "  consists  of  nothing  whatever,  except  a  power  of 
exacting  tribute  from  labor  by  means  of  ground  rents.1 

1  This  has  just  been  adjudged  by  the  U.  S.  Supreme  Court  (Pollock  v. 
Farmers'  Loan  Co.,  April,  1895).  As  a  scientific  question,  it  was  never 
open  to  doubt. 


72  NATURAL    TAXATION. 

The  fruits  of  labor,  in  which  alone  this  tribute  can  be 
paid,  consist  solely  of  improvements  and  chattels.  It  is 
impossible  that  the  value  of  land  should  exceed  the  other 
values  combined  ;  because  that  would  mean  that  land- 
lords got  more  than  there  is  to  get.  In  the  struggle  be- 
tween the  landlord,  the  capitalist,  and  laborer,  we  might 
reasonably  anticipate  that  the  landlord  would  not  get 
more  than  one  third  of  the  whole  net  produce  ;  and  this 
appears  to  be  the  actual  average.  Vacant  land  brings  no 
present  rent ;  but  it  has  a  market  value  equal  to  the 
present  value  of  its  expected  future  rent.  And  this  is  of 
course  an  additional  value  in  the  landlord's  possession. 

But  nowhere  are  actual  chattels  found  by  assessors  to 
anything  like  this  proportion  of  the  value  of  land.  Tak- 
ing only  places  in  which  there  are  rigid  assessment  laws, 
rigidly  enforced,  Boston  discovers  visible  chattels  to  the 
amount  of  only  2^/2  per  cent,  of  its  real  estate,  Cincin- 
nati to  only  10  per  cent.,  Ohio  to  only  15  per  cent.,  Min- 
nesota to  only  20  per  cent. ;  whereas,  in  each  case,  the 
proportion  should  be  40  per  cent.  Here,  as  in  every  other 
instance,  it  is  noticeable  that  the  proportion  of  chattels 
discovered  by  the  assessor  is  greater  and  greater  as  the 
proportion  of  farmers  to  the  entire  population  increases. 

§  2.  Taxation  of  personal  property  always  a  fail- 
ure. If  anything  in  human  experience,  as  applied  to 
methods  of  taxation,  is  settled,  it  certainly  is  the  fact  that 
taxation  upon  personal  property  never  can  be  made  a  suc- 
cess. Taxes  can  be  raised  from  personal  property,  no 
doubt  ;  for  large  sums  are  thus  raised  ;  but  that  they  can- 
not be  levied  with  any  reasonable  approach  to  accuracy 
or  equality  is  demonstrated,  not  only  by  conclusive  reason- 
ing, but  by  the  more  conclusive  fact  that  they  never  have 
been  thus  levied.  It  is  not  for  want  of  earnest  and  long 
sustained  effort  that  the  failure  of  this  system  of  taxation 


TESTIMONY  OF  EXPERIENCE.  73 

has  come  to  pass.  For  centuries  the  effort  has  been  made  ; 
and  for  at  least  six  centuries  it  was  backed  by  all  the  power 
of  a  government  which  commanded  the  whole  civilized 
world  and  which  armed  its  tax-gatherers,  not  with  the  pal- 
try weapons  of  oaths  and  penalties,  but  with  the  more 
substantial  powers  of  indiscriminate  search,  the  lash,  the 
rack,  the  thumbscrew,  the  gridiron,  and  the  cross.  The 
Roman  empire  fell  to  pieces  under  the  pressure  of  this 
vain  effort  to  reach  personal  property  by  taxation.1  The 
same  thing  was  attempted,  at  a  later  period,  in  dealing 
with  the  Jews.  It  failed  with  them.  They  could  be 
robbed  and  murdered  ;  but  they  could  not  be  regularly 
taxed. 

That  which  all  the  tremendous  power  of  Rome,  in  its 
grandest  days,  failed  to  accomplish,  that  which  the  infer- 
nal tortures  of  Spain  could  not  accomplish,  when  it  be- 
headed hundreds,  burned  thousands,  and  massacred  tens 
of  thousands,  letting  loose  a  brutal  soldiery  in  a  vain 
struggle  to  tax  the  Netherlands,  American  farmers  are 
still  apparently  convinced  that  they  can  accomplish,  by 
distributing  blank  forms,  administering  long  oaths,  and 
threatening  penalties  of  fifty  per  cent.  How  far  they  have 
succeeded,  governors,  assessors,  and  tax  commissions  in 
New  York,  Ohio,  Maryland,  West  Virginia,  and  many  other 
States,  have  set  forth  again  and  again,  lamenting  the  utter 

1  Gibbon  mentions,  quite  as  a  matter  of  course,  that  fathers  murdered 
their  children,  on  a  large  scale,  principally  as  a  result  of  fear  of  tax-gather- 
ers ;  that  racks  and  scourges  were  freely  used  ;  that  the  approach  of  the 
tax-gatherer  "  was  announced  by  the  tears  and  terrors  of  the  citizens  "  ;  and 
that  false  returns  were  punished  with  horrid  deaths,  as  being  both  "  treason 
and  sacrilege  "  (History,  ch.  xiv.  and  xvii.).  Savigny  shows  that  the  decu- 
rions,  who  governed  the  cities  and  were  held  responsible  for  the  taxes,  often 
sold  themselves  into  slavery  to  escape  the  dreadful  burden,  but  were  dragged 
back  to  scourge  their  fellow-subjects  (Smith's  note,  2  Gibbon,  335,  ed.  1862  ; 
i  Savigny,  Hist.  Roman  Law,  40  :  2d  ed,).  Even  a  Massachusetts  farmer 
Could  ask  no  greater  efficiency  tha,n.  this, 


74  NATURAL    TAXATION. 

failure  of  the  system.  Their  complaints  _have  become 
monotonous  in  their  uniformity.  Nothing,  indeed,  has 
been  added  to  the  sum  of  knowledge  on  this  point,  since 
the  calm  and  detailed  report  of  David  A.  Wells  to  the 
New  York  legislature,  in  1871  ;  in  which  the  experience 
of  that  State  and  many  other  States  was  luminously  set 
forth  ;  and  it  was  made  clear  that  taxes  on  personal  prop- 
erty were  nowhere  equally  assessed  or  efficiently  collected. 
§  3.  Taxation  by  oath.  The  result  of  the  widespread 
maintenance  of  these  taxes  is  to  fill  the  land  with  liars  and 
perjurers.  In  some  States  the  business  of  perjury  is  mostly 
confined  to  the  assessors  ;  who  regularly  make  returns 
which  they  know  to  be  false,  but  cannot  make  true.1  In 
others,  such  as  Ohio,  Vermont,  Connecticut,  all  the  South- 
ern States  and  most  of  the  Western  States,  perjury  is  the 
business  of  the  taxpayers.2  Their  scrupulous  consciences, 
in  many  cases,  find  a  way  of  escape  by  omitting,  in  fact, 
to  take  the  oath  which  they  sign  ;  and  they  are  innocent 
of  everything  except  lying.  The  delicately  conscientious 
get  some  one  to  sign  for  them  ;  and  where  an  oath  is  ab- 
solutely required,  a  considerate  notary  certifies  to  the  oath 
before  it  is  taken  ;  after  which,  of  course,  it  is  not  taken 
at  all.  On  surveying  the  whole  field,  however,  one's  faith 
in  American  truthfulness  is  cheered,  and  we  entertain 
larger  hopes  for  the  future  of  humanity.  For  it  appears 
that,  where  blanks  are  diligently  circulated  and  oaths  in- 
sisted upon,  the  average  man  will  return  ten,  if  not  fifteen 
per  cent,  of  his  personal"  property  ;  whereas,  in  the  ab- 
sence of  this  appeal  to  piety,  he  will  return  nothing  at  all. 
This  touching  proof  of  American  reverence  for  the  sacred- 

1  Hon.  Martin  I.  Townsend,   Const.   Conv.,   1867;  Auditor's  Rep.,  Ne- 
braska, 1894. 

2  Report  Ohio  Com.,  1893  ;  Ely  on  Taxation  y  D.  A.  Wells's  Rept.  on 
Local  Taxation ,  1871, 


TESTIMONY  OF  EXPEDIENCE,  75 

ness  of  an  oath  reminds  one  of  the  famous  Yankee  who, 
hearing  his  father  accused  of  having  falsely  warranted  the 
quality  of  a  trifle  sold  for  "  ninepence  "  (the  New  England 
eighth  of  a  dollar)  replied  :  "  No  ;  the  old  man  would 
never  tell  a  lie  for  ninepence  ;  though  he  would  tell  eight 
of  'em  for  a  dollar." 

§  4.  The  Experience  of  New  York.  How  is  it  in  the 
State  of  New  York  ?  One  of  the  most  experienced  assess- 
ors in  that  State,  Mr.  George  H.  Andrews,  addressing  a 
legislative  committee  on  October  6,  1874,  said  : 

"  No  man  and  no  corporation,  banks  only  excepted,  needs  pay  a  tax  upon 
personal  property.  Widows  and  orphants  must  pay.  Upon  them  in  the  ex- 
tremity of  their  distress,  the  law  lays  its  heavy  hand.  It  bereaves  the  be- 
reaved. Moribund  itself,  it  has  an  affinity  for  the  effects  of  the  dead.  The 
records  of  the  surrogate  furnish  the  schedule,  and  the  machinery  of  the  law 
used  in  adjusting  an  estate  is  not  sufficiently  flexible  to  regularly  permit  such 
a  transfer  of  securities  as  would  insure  an  exemption." 

As  might  well  be  expected,  the  State  assessors,  on  Jan- 
uary 21,  1874,  reported  "  that  less  than  fifteen  per  cent, 
of  the  personal  property  of  the  State  liable  to  taxation 
finds  a  place  on  the  rolls  of  the  assessor,  and  that  of 
mortgages,  not  over  five  per  cent,  of  the  value  is  as- 
sessed." In  one  town  the  proceeds  of  a  single  auction 
sale  of  cattle,  belonging  to  one  resident,  amounted  to 
$360,000 ;  while  the  whole  assessment  of  personal  prop- 
erty in  that  town  was  $28,850;  "  a  sum  very  much  less 
than  that  obtained  for  one  cow."  The  assessors  say  : 
"  A  large  percentage  of  all  the  personal  property  assessed 
is  found  entered  on  the  rolls  to  women,  minor  heirs,  luna- 
tics, who  cannot  watch  with  the  eagle  eye  of  business 
men,  or  to  trustees  or  guardians."  In  some  towns  these 
classes  held  more  than  one  half  of  all  the  personal  pro- 
perty on  the  assessment  roll.  Two  women,  residing  in 
the  village  of  Batavia,  were  assessed  for  more  personal 


76  NATURAL    TAXATION. 

property  than  all  the  individuals  in  the  neighboring  city 
of  Rochester,  with  a  population  of  70,000.  In  one  town 
a  girl,  mentioned  in  the  assessment  as  a  lunatic,  was 
assessed  $5000  for  personal  property  ;  which  the  assessor 
stated  was  the  full  amount  of  her  personal  estate.  All 
over  the  State  "  the  amount  of  assessment  depends  more 
on  the  will,  craft,  conscience  (or  want  of  conscience)  of  the 
party  assessed  than  upon  the  law  or  its  enforcement." 

The  state  of  affairs  has  grown  worse  with  each  succeed- 
ing year.  In  1892  a  ridiculous  law  was  passed,  much 
lauded  by  the  governor,  requiring  applicants  for  reduction 
of  assessment  to  make  oath  that  they  had  not  incurred 
debts  in  the  purchase  of  non-taxable  property  or  for  the 
purpose  of  avoiding  taxation.  It  ought  to  have  been 
entitled  :  "  An  act  to  punish  truthfulness  and  to  reward 
perjury." 

Experienced  assessors  in  every  state  say  that  the  most 
honest  returns  of  property  are  always  made  by  the  poorer 
classes,  and  the  most  inadequate  returns  by  millionaires ; 
while  widows,  who  have  no  experience  in  business,  and 
trustees,  who  represent  widows  and  orphants,  are  taxed 
upon  every  dollar  that  they  own. 

§  5.  Experience  of  California.  The  experience  of 
California  furnishes  perhaps  the  latest  example  of  the 
utter  failure  of  all  schemes  for  taxing  personal  property 
to  work  out  anything  like  an  approximation  to  justice. 

In  I  $79  a  new  constitution  was  adopted.  It  was  car- 
ried through  solely  by  the  farmers'  votes ;  merchants, 
bankers,  and  capitalists,  whether  large  or  small,  voting 
almost  unanimously  against  it.  Under  this  constitu- 

1  Who  can  tell  just  what  is  meant  by  "non-taxable  property";  Hardly 
any  two  lawyers  would  at  once  agree  upon  a  definition.  And  who  can  tell 
precisely  for  what  "  purpose"  he  incurred  a  debt?  The  statute  is  only  one 
more  premium  upon  either  shrewdness  or  perjury. 


TESTIMONY  OF  EXPERIENCE.  77 

tion  and  these  laws,  not  only  were  bonds,  money,  and 
credits  made  taxable,  without  any  deduction  on  account 
of  debts,  except  from  credits,  and  then  only  such  debts  as 
are  due  to  residents  of  the  State  of  California  ;  but  holders 
of  stock  in  corporations  were  avowedly  and  intentionally 
subjected  to  double  taxation,  first,  upon  the  corporate 
property,  and  again  upon  the  capital  stock,  which  is 
merely  their  evidence  of  title  to  that  property.  It  was 
supposed,  alike  by  the  friends  and  enemies  of  the  new 
constitution,  that  under  its  operation  personal  property 
of  every  description  would  be  thoroughly  reached,  and  at 
any  rate,  that  whatever  was  by  any  chance  overlooked 
would  be  more  than  made  up  by  double  taxation  upon  that 
which  was  found.  The  actual  result  has  been  to  falsify 
all  the  predictions  of  both  the  friends  and  enemies  of  the 
constitution  ;  for  it  has  done  almost  none  of  the  good  or 
evil  which  was  anticipated  ;  for  the  reason  that  the  capac- 
ity of  the  patriotic  taxpayer  to  commit  perjury,  and  the 
susceptibility  of  assessors  to  bribery  had  been  altogether 
underestimated.  Some  of  the  results  are  positively 
ludicrous. 

§  6.  Poor  California  !  If  the  assessment  returns  are 
to  be  believed,  in  nine  tenths  of  California  there  is  not  a 
pound  of  butter  ;  in  four  fifths  of  the  State  the  sheep  do 
not  produce  any  wool ;  fifty  counties  have  quantities  of 
beehives,  but  only  four  have  any  honey  ;  personal  prop- 
erty is  vanishing  from  San  Francisco ;  loans  of  money 
are  becoming  unknown  in  the  rest  of  the  State  ;  municipal 
bonds  of  all  kinds  are  not  held  within  the  State  to  an 
amount  equal  to  one  tenth  of  those  outstanding  ;  and, 
finally,  money  has  been  smitten  by  a  pestilence,  two  thirds 
of  all  that  was  there  before  the  adoption  of  the  constitu- 
tion having  already  taken  to  itself  wings,  and  showing  no 
sign  of  returning.  One  of  the  great  objects  of  the  new 


78  NATURAL    TAXATION. 

constitution  was  to  tax  railroad,  telegraph,  and  telephone 
companies  to  the  last  cent  of  their  value.  The  actual 
result  has  been  that  telegraph  and  telephone  companies 
were  assessed  in  1886  for  less  than  the  cost  of  their  bare 
poles,  or  about  $65  per  mile.  The  railroad  companies  re- 
sisted taxation  for  one  or  two  years ;  at  the  end  of  which, 
by  a  singularly  simultaneous  impulse  of  virtue,  some 
thirty  boards  of  supervisors  directed  their  district  attor- 
neys rigorously  to  prosecute  the  railroad  companies  to 
the  uttermost  of  the  law.  Thirty  district  attorneys  forth- 
with dragged  the  railroad  companies  before  the  judicial 
tribunals.  With  equal  promptness  the  thirty  boards  of 
supervisors  met,  and,  without  any  consultation  with  each 
other,  passed  resolutions  directing  the  district  attorneys 
to  compromise  all  suits  at  60  per  cent,  of  the  amount 
claimed  ;  and  the  thirty  district  attorneys  obeyed  before 
the  State  officers  could  protest,  even  by  telegraph. 

The  general  result  has  been  that  the  proportion  of  per- 
sonal property  to  the  whole  assessed  value  of  property 
has  steadily  fallen  from  50  per  cent,  in  1861  to  34  per 
cent,  in  1874,  26  per  cent,  in  1880,  and  13^-  per  cent,  in 
1894. 

§  7.  Cities  relieved ;  farmers  burdened.  The  fol- 
lowing table  will  show  the  working  of  a  series  of  meas- 
ures which  were  expected,  above  all  things,  to  increase 
the  burdens  of  taxation  upon  San  Francisco  on  personal 
property,  and  especially  upon  money.  For  convenience, 
thousands  are  omitted  in  this  table,  and  the  figures 
"  ooo  "  must  be  added  in  every  case : 


TESTIMONY  OF  EXPERIENCE. 


79 


CALIFORNIA    ASSESSMENTS 

IN   THOUSANDS    OF    DOLLARS. 


1880. 

Land. 

Improve- 
ments on 
Land. 

Money. 

Other 
Personal 
Property. 

Total. 

San  Francisco  

122  030 

42,969 

19,747 

68,584 

253,330 

Remainder  of  State. 

227,127 

68,568 

4-931 

81,072 

381,698 

1886. 
San  Francisco.  .      .  . 

349.157 
I2O  17< 

in,537 
55,034 

24,678 
6.188 

149,656 

48,705 

635,028 
2^0,302 

Remainder  of  State. 

340,274 

ioo,775 

2,887 

94,022 

537,953 

1894. 
San  Francisco.  . 

460,649 
178  OCX) 

155,809 
83  870 

9,075 
7,100 

142,727 
56,130 

768,255 
325,109 

Remainder  of  State  . 

537,000 

160,935 

3,i87 

89,430 

79J.043 

715,000 

244,814 

10,287 

145,560 

1,116,152 

In  the  foregoing  table  no  account  is  taken  of  railroads 
which  are  separately  assessed  by  State  officers.  There 
was  an  increase  in  the  valuation  of  railroads  from  $31,- 
174,000  in  1880  to  $48,05  r,ooo  in  1886,  which  was  reduced 
in  1894  to  $42,730,640;  of  course  nearly  all  outside  of 
San  Francisco.  The  valuation  of  San  Francisco  in  1894 
was  arbitrarily  increased  by  the  State  officers  15  per  cent, 
above  the  figures  here  given. 

In  reviewing  this  table  it  will  be  seen  that  while  im- 
provements upon  land  in  San  Francisco  increased  about 
one  third  in  six  years,  money  fell  off  more  than  two 
thirds,  and  other  personal  property  nearly  one  third.  In 
the  rest  of  the  State,  which  is  mainly  agricultural,  the 
value  of  improvements  increased  nearly  one  half  ;  personal 
property,  other  than  money,  increased  nearly  one  sixth; 
while  the  loss  of  money  among  the  farmers,  though 


8o 


NATURAL    TAXATION. 


severe,  did  not  compare  with  the  affliction  which  befell 
the  capitalists  of  San  Francisco.  The  general  result  was 
to  reduce  the  share  of  San  Francisco  in  the  State  tax 
from  40  per  cent,  to  30  per  cent.  In  other  words,  the  city 
paid  25  per  cent,  less,  and  the  farmers  i6|  per  cent.  more. 

This  result  has  continued  ever  since.  The  assessments 
for  1894  show  that  San  Francisco  still  pays  only  31  per 
cent,  of  the  State  taxes  on  property  outside  of  railroads. 
And  even  this  result  is  only  obtained  by  an  arbitrary  in- 
crease of  15  per  cent,  in  the  city's  share  by  State  officers. 

§  8.  Taxation  of  merchandise  and  bonds.  Looking 
into  the  details  of  personal  property,  attention  is  naturally 
attracted  toward  the  three  items  of  merchandise,  bonds, 
and  credits  ;  all  of  which  it  was  supposed  that  the  new 
methods  of  assessment  would  reach  to  a  degree  never 
before  known. 

The  actual  result  was  as  follows  : 

CALIFORNIA    ASSESSMENTS 

IN   THOUSANDS    OF   DOLLARS. 


Mdse. 

Bonds. 

Credits. 

Total. 

1880. 

San  Francisco  

16  146 

2  311 

5Q73 

24  43O 

Remainder  of  State. 

1  1  ^04 

72O 

14  7J.O 

26  G7^ 

1886. 
San  Francisco 

27,650 
1  1?  7I3 

3,040 

20,713 
6<I7O 

51,403 

Remainder  of  State  

je  QJ.2 

678 

5  21  1 

21   O3I 

1894. 
San  Francisco  

30,755 

16  123 

1,127 
3606 

12,590 

8474 

44,472 
28  2O"? 

Remainder  of  State 

17  J.62 

]28 

r     QrQ 

00     /IjR 

33,585 

3,824 

14,332 

51,741 

TESTIMONY  OF  EXPERIENCE.  Si 

Here  it  appears  that  a  very  small  increase  (less  than 
one  per  cent.)  has  been  returned  at  the  end  of  fourteen 
years;  all  of  which  dates  only  from  1892,  up  to  which 
time  the  return  bonds  continued  insignificant. 

§  9.  Experience  of  Boston.  According  to  unanimous 
testimony,  the  city  of  Boston  is  so  fortunate  as  to  possess 
a  board  of  assessors,  in  whose  honesty  and  ability  every 
one  has  confidence,  and  who  are  fanatical  believers  in  the 
taxation  of  personal  property.  These  assessors  are  armed 
by  law  with  almost  despotic  powers  of  search  and  with 
absolutely  despotic  powers  of  valuation.  They  can  ran- 
sack every  man's  books ;  they  can  disregard  all  the  evi- 
dence, when  they  have  finished.  After  exhausting  all 
their  powers  of  inquiry,  they  are  allowed  to  meet  in  secret, 
to  go  through  a  process  of  arbitrary  assessment,  fitly 
known  by  the  name  of  "  dooming."  Their  return  of 
details  for  the  year  1889  showed  that  the  whole  amount 
of  taxable  property,  which  they  were  actually  able  to  dis- 
cover, was  $39,000,000,  exclusive  of  bank  stock.  Being 
dissatisfied  with  this  estimate,  which  was  all  that  was 
justified  by  any  facts  which  they  could  state,  they  pro- 
ceeded to  multiply  it  four  and  a  half  times  by  a  mere 
guess.  In  their  dooming  chamber  they  guessed  that  per- 
sonal property,  other  than  bank  stock,  ought  to  be  valued 
at  $186,000,000;  and  the  citizens  of  Boston  were  com- 
pelled to  pay  taxes  upon  that  amount.  Could  anything 
be  more  monstrous  or  more  absurd  than  a  system  of  tax- 
ation which,  even  when  administered  by  phenomenally 
honest  and  competent  men,  produces  such  results? 

The  items  of  which  the  $39,000,000  actually  discovered 
consist  are  in  the  following  proportions,  in  round  num- 
bers: 

Visible  to  assessors $14,570,000  or 

Invisible  to  them 24,650,000  or 


82  NATURAL    TAXATION. 

Almost  the  whole  of  the  things  visible  to  Boston  assess- 
ors consisted  of  merchandise  and  machinery.  Taxes 
upon  these,  of  course,  if  equally  distributed,  simply 
increased  the  cost  of  goods  to  consumers,  just  as  excise 
duties  on  whisky  increase  the  cost  of  whisky  to  drinkers. 
But  it  is  manifest,  from  the  arbitrary  increase  made  by 
the  assessors,  that  these  taxes  were  not  equally  distrib- 
uted and  therefore  one  large  section  of  taxpayers  was 
robbed  for  the  benefit  of  the  other  section.  For  unequal 
taxation  upon  producers  makes  it  impossible  for  those 
who  are  taxed  beyond  their  just  share  to  recover  such 
excess  from  their  customers ;  while  those  who  are  taxed 
below  their  share  recover  all  which  they  would  have  paid 
under  strictly  equal  taxation.  It  follows  that  those  who 
are  taxed  most  are  simply  plundered,  under  forms  of  law, 
for  the  profit  of  their  competitors  who  are  taxed  least. 
If  Havemeyer  and  Spreckels  were  the  only  refiners  of 
sugar,  and  both  were  taxed  equally  upon  their  produc- 
tion, both  would  recover  the  tax  from  their  customers. 
But  if  Havemeyer  should  be  taxed,  while  Spreckels  went 
free,  Spreckels  could  undersell  Havemeyer,  who  would  be 
practically  robbed  for  Spreckels'  benefit. 

§  10.  Double  taxation.  Passing  to  the  invisible  prop- 
erty assessed  in  Boston,  we  find  that  $4,000,000  consisted 
of  cash,  $7,700,000  of  stock  in  foreign  corporations,  and 
$12,500,000  of  debts,  of  which  two  thirds  were  secured 
by  mortgage  on  real  estate.  Thus  more  than  half  of  all 
the  personal  property  returned  for  taxation  consisted  of 
mere  paper  titles  to  or  liens  against  other  things,  which 
were  taxed  somewhere  else.  If  this  is  not  double  taxa- 
tion, what  is? 

See  how  the  system  works.  Smith  forms  a  little  corpo- 
ration, to  own  a  railroad  in  Vermont.  The  railroad  is 
fully  taxed  there.  But  Smith  lives  in  Boston  ;  and,  as 


TESTIMONY  OF  EXPERIENCE.  83 

he  owns  all  the  stock,  say  $100,000,  and  stock  in  a  foreign 
corporation  is  assessed  there,  he  is  taxed  on  the  whole 
amount  a  second  time.  He  mortgages  the  road  for  $100,- 
ooo,  and  spends  the  proceeds  on  improvements.  This 
additional  value  is  taxed  in  Vermont.  But  he  sells  the 
mortgage  bonds  to  Brown,  of  Boston  ;  who  is  thus  taxed 
again  upon  the  whole  $100,000  there.  Brown  pledges  the 
bonds  to  Jones,  as  security  for  a  loan  of  $100,000;  and 
forthwith  Jones  is  taxed  upon  the  whole  amount.  This 
makes  three  taxes  upon  only  one  piece  of  real  property. 

This  is  the  way  in  which  the  wise  men  of  Massachusetts 
mean  that  their  laws  shall  work ;  but  as  the  taxpayers 
revolt  against  such  injustice,  and  protect  themselves  in 
the  only  way  open  to  them,  to  wit,  by  hard  swearing  or 
by  refusing  to  make  returns,  Massachusetts  counteracts 
that  evil,  by  imposing  an  arbitrary  tax  upon  those  who 
do  not  make  returns,  four  times  as  large  as  is  paid  by 
those  who  do. 

In  Illinois  an  even  more  drastic  method  prevails.  A 
Board  of  Equalization,  if  of  opinion  that  the  valuation 
of  any  county  is  too  low,  increases  everybody's  taxes 
fourfold,  on  the  assumption  that  all  have  made  false 
returns  alike.  Thus  the  conscientious  taxpayer  is  made 
to  feel  that  virtue  must  indeed  be  its  own  reward. 


CHAPTER   VI. 
EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS. 

§  I.  The  question  stated.  Of  course  there  are  some 
forms  of  personal  property  which  can  be  seen  and  ap- 
praised by  the  assessors,  almost  as  readily  as  real  estate, 
though  not  with  so  correct  an  estimate  of  value.  The 
objection  to  taxation  of  chattels  is  not  that  none  of  them 
can  be  taxed  ;  it  is  that  so  many  of  them  can  be  and  are 
reached,  while  so  many  more  are  not,  that  the  tax  is  nec- 
essarily unequal  and  unjust.  The  important  question, 
therefore,  is,  upon  what  class  does  this  tax  bear  most 
oppressively  ?  Is  that  class  the  more  wealthy  or  the  less 
wealthy  ?  Is  it  the  city  population  or  the  farmers  ?  If 
taxes  were  levied  only  upon  the  value  of  real  estate,  would 
the  farmers  pay  more  or  less  of  the  whole  taxes  than  they 
do  now  ? 

Farmers  in  general  have  been  long  convinced  that  the 
rigid  taxation  of  personal  property  would  relieve  their 
burdens  ;  and  it  is  entirely  by  their  votes  that  the  exist- 
ing system  is  maintained.  This  is  all  theory  on  their  part. 
They  have  not  studied  the  facts  and  know  nothing  about 
them.  They  assume  that  "  it  must  be  so." 

But  let  us  study  the  facts,  before  discussing  any  theory. 

Any  attempt  to  separate  the  community  into  two  dis- 
tinct classes,  one  of  which  is  taxable  only  on  real  estate 
and  the  other  of  which  is  taxable  only  on  personal  prop- 
erty, is  obviously  impossible  and  absurd.  No  man  is  ever 
reached  by  the  tax-gatherer,  who  does  not  occupy  some 

84 


EFFECT  OF  THE   PERSONALTY  TAX  ON  FARMERS.      85 

piece  of  land.  If  he  did  not,  the  tax-collector  would 
never  find  him.  Tramps  pay  no  direct  taxes.  Neither 
can  any  man  live  without  occupying  some  improvements 
on  real  estate  and  possessing  some  personal  property. 
Every  taxpayer,  without  exception,  is  an  occupant  of 
land  and  improvements  upon  land,  and  an  owner  of  per- 
sonal property.  The  only  selfish  interest  which  any  tax- 
payer has,  in  deciding  between  rival  systems  of  taxation, 
is  to  know  which  will  produce  a  sufficient  revenue  to  the 
state,  with  the  smallest  possible  burden  to  him.  In  con- 
sidering, therefore,  the  interest  of  any  class,  such  as  farm- 
ers, the  real  question  to  be  answered  is  not  whether  they 
in  fact  own  more  or  less  personal  property  than  mer- 
chants, bankers,  and  money  lenders.  The  questions  to  be 
answered  are  : 

1.  Do  farmers  own  less  personal  property,  in  proportion 
to  the  value  of  their  land,  than  do  those  other  classes  ? 

2.  Are  the  particular  kinds  of  personal  property  which 
they  own  less  easily  reached  by  the  tax-gatherer,  than  are 
the  kinds  of  property  owned  by  the  other  classes  ? 

The  state  must  raise  a  certain  fixed  amount  for  public 
purposes.  This  amount  it  will  assess  upon  all  taxpayers, 
in  proportion  to  the  value  of  their  property,  as  reported 
by  the  assessors  ;  not  in  proportion  to  its  real  value  ; 
which  the  assessors,  of  course,  are  never  able  exactly  to 
ascertain.  If,  therefore,  experience  proves  that  assessors 
are  able  to  find  twenty  times  as  much  land  value  in  the 
possession  of  merchants  as  they  can  among  farmers,  but 
only  ten  times  as  much  personal  property  among  mer- 
chants as  they  find  among  farmers,  it  is  a  plain  result,  as 
simple  as  the  rule  of  three,  that  the  taxation  of  personal 
property  will  end  in  making  fanners  pay  a  larger  proportion 
of  tJie  taxes  than  they  would  pay  if  all  taxes  were  con- 
centrated on  the  value  of  real  estate. 


86  NATURAL    TAXATION. 

§  2.  The  farmer's  idea.  Now  the  average  farmer,  no 
doubt,  says  at  once  that  this  is  impossible.  He  owns,  we 
will  say,  100  acres  of  land  ;  and  he  knows  of  no  merchant 
in  any  of  the  great  cities  who  owns  as  much  as  one  acre. 
He  owns  neither  stock  nor  bonds,  and  has  only  $500  in 
the  bank.  He  knows  of  1000  merchants  or  money  lend- 
ers who  each  own  $100,000  or  $1,000,000  in  stocks  and 
bonds  and  keep  balances  of  $50,000  in  the  bank.  To 
him,  therefore,  it  seems  plain  that  the  exemption  of  per- 
sonal property  from  taxation  must  make  him  pay  much 
more,  in  proportion  to  his  means,  than  the  merchant  and 
banker. 

§  3.  The  farmer's  error.  But  the  farmer,  in  reason- 
ing thus,  entirely  overlooks  the  most  important  facts  of 
the  problem,  and  abandons  the  common-sense  of  which 
he  so  much  boasts.  That  common-sense  would  tell  him 
that,  just  as  his  one  hundred  acres  are  worth  far  more 
than  100,000  acres  in  the  midst  of  Africa,  so  one  tenth  of 
an  acre  in  the  heart  of  a  large  city  is  worth  more  than 
all  his  farm.  It  would  also  tell  him  that  the  assessor 
can  easily  count  his  cattle,  horses,  sheep,  and  hogs,  and 
estimate  pretty  correctly  the  value  of  his  house  and  barns  ; 
whereas,  the  most  expert  assessor  can  never  find  out  how 
many  bonds  the  banker  owns,  unless  he  can  persuade  that 
banker  to  tell  him  ;  while  in  estimating  the  value  of  the 
banker's  house  and  furniture,  he  might  guess  at  $10,000, 
$25,000,  or  $50,000,  with  a  perfectly  equal  chance  of  being 
right  or  wrong  in  either  case.  The  banker  has  chairs 
standing  side  by  side,  apparently  of  exactly  equal  value, 
but  one  of  which  cost  $25  and  the  other  $250.  He  has 
two  paintings,  one  of  which  is  five  times  as  large  as  the 
other,  and  which  the  honest  farmer  would,  therefore, 
think  to  be  five  times  as  valuable  ;  whereas  in  fact  the 
large  picture  is  barely  worth  $500,  while  the  small  one 


EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS.      8/ 

would  sell  as  quick  as  lightning  for  $20,000.  There  are 
many  houses,  in  large  cities,  upon  the  interior  decoration 
of  which  the  owners  have  spent  more  than  $100,000.  The 
most  experienced  assessors  would  fail  to  discover  that  these 
decorations  were  really  more  costly  than  those  in  adjoin- 
ing houses,  which  in  fact  did  not  cost  one  tenth  of  that 
amount. 

§  4.  Taxation  of  franchises.  Nor  is  the  difficulty  of 
this  problem  confined  to  the  difficulty  which  the  assessor 
finds  in  doing  his  work.  Vast  amounts  of  what  are  com- 
monly called  personal  property,  and,  indeed,  the  bulk  of 
those  things  which  the  average  farmer  seeks  to  tax  as 
personal  property,  consist  of  really  nothing  but  rights 
over  real  estate.  Thus  the  value  of  bonds  of  a  railroad 
corporation  consists  very  largely  in  the  land  which  the 
company  covers  by  its  tracks,  engine  house,  stations, 
etc.  ;  and  the  stock  of  such  corporations  represents  prac- 
tically nothing  else.  The  franchises  of  such  corporations, 
which,  of  course,  constitute  a  larger  part  of  the  value  of 
both  stocks  and  bonds,  really  consist  of  nothing  but  the 
right  to  use  certain  tracts  of  land,  to  the  exclusion  of  all 
other  persons.  Under  any  proper  assessment  of  the 
value  of  land,  those  franchises  would  be  assessed  at 
their  full  value  ;  because  the  franchise  of  exclusive  use 
is  all  that  gives  to  any  land  its  commercial  value.  A 
system  of  taxation  upon  the  full  value  of  land 
would,  therefore,  levy  taxes  upon  every  dollar  which  cor- 
porate franchises  are  worth.  No  system  of  taxation  on 
personal  property  is  needed  in  the  smallest  degree  for 
this  purpose.  It  is  indeed  only  a  hindrance  to  it  and  a 
convenient  means  of  evading  taxation  ;  for  the  assessor, 
not  being  allowed  to  compute  this  value,  in  estimating 
the  value  of  the  land,  has  to  take  his  chances  of  finding 
it  under  the  name  of  personal  property.  All  mortgages 


88  NATURAL    TAXATION. 

on  land  are,  of  course,  practically  interests  in  the  land  it- 
self, and  would  be  fully  taxed  under  a  system  of  taxation 
confined  to  the  value  of  the  land.  The  tax  may  be 
collected  from  either  the  mortgagor  or  the  mortgagee,  as 
the  legislature  should  think  fit.  Either  plan  is  perfectly 
consistent  with  the  exemption  of  personal  property  from 
taxation. 

§  5.  The  experience  of  Ohio.  In  the  light  of  these 
considerations,  let  us  review  some  of  the  statistics  fur- 
nished from  year  to  year  by  the  official  reports  of  assess- 
ors in  Ohio,  as  compiled  annually  in  the  auditor's  report. 
For  the  purpose  of  such  comparison  let  us  set  on  one  side 
the  four  counties  which  include  all  the  largest  cities,  and 
on  the  other  side  the  five  counties  which  contain  the  small- 
est proportion  of  city  population  among  all  the  counties 
of  Ohio. 

The  former,  which  we  will  call  the  city  counties,  include 
Hamilton,  Cuyahoga,  Franklin,  and  Lucas,  with  the  cities 
of  Cincinnati,  Cleveland,  Columbus,  and  Toledo. 

The  latter,  which  we  will  call  the  rural  counties,  are 
Geauga,  Noble,  Carroll,  Medina,  and  Monroe. 

These  counties  respectively  represent  the  extreme  con- 
trasts between  the  cities  and  the  farms  of  the  State.  Thus, 
in  Hamilton  and  Cuyahoga,  the  assessed  value  of  town 
lots  is  about  seven  times  the  assessed  value  of  the  farms ; 
whereas,  in  the  five  rural  counties,  the  assessed  value  of 
farms  is  nowhere  less  than  ten  times  that  of  town  lots, 
while,  in  Geauga  County,  the  farm  lots  are  worth  twenty- 
seven  times  as  much  as  the  town  lots.  Hamilton  County, 
which  includes  Cincinnati,  is  the  typical  city  county  of 
Ohio  ;  while  Geauga,  which  includes  no  large  town,  is  the 
typical  rural  county. 

§  6.  Farmers  pay  largest  share  cf  taxes  on  personal 
property.  Now,  the  first  thing  which  strikes  the  eye,  on 


EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS.      89 

looking  over  the  statistics  of  these  counties,  is  the  follow- 
ing comparison  : 

Ohio  Valuations,   1887. 

Assessed  Val.  Assessed  Val. 

of  Real  Est.  of  Chattels. 

City  counties $317,854,665  $113,340,087 

Rural  counties 29,733,450  14,307,668 

Any  one  can  see  that,  in  the  counties  which  include  all 
the  large  cities,  the  assessed  value  of  personal  property  is 
only  about  one  fourth  of  the  whole  assessment  ;  while  in 
the  rural  counties,  personal  property  constitutes  very 
nearly  one  third  of  their  whole  assessed  value.  In  more 
exact  figures,  the  value  of  assessed  personal  property  in 
the  city  counties  is  26^  per  cent,  of  the  whole,  while  in 
the  rural  counties  it  is  32^  per  cent.  If,  therefore,  all  per- 
sonal property  should  be  exempted  from  taxation,  the 
farmers  of  these  five  exclusively  rural  counties  would  pay 
8  per  cent,  less  taxes  than  they  do  now. 

That  this  result  is  not  a  mere  accident,  owing  to  some 
peculiar  condition  of  these  particular  counties,  is  easily 
proved  by  testing  the  same  question  in  other  ways.  Thus, 
if  we  set  apart  the  four  great  city  counties  and  compare 
them  with  all  the  rest  of  the  State,  including  farming  dis- 
tricts and  smaller  towns  indiscriminately,  we  find  substan- 
tially the  same  result,  as  follows : 

Ohio    Valuations,   1887. 

Personal 
Real  Estate.  Property. 

City  counties  $317,854,665         $113,340,087 

Remainder  of  State 867,155,960  406,832,007 

Here,  in  the  counties  which  include  all  the  great  cities, 
personal  property  amounts  to  26^  per  cent,  of  the  whole 
valuation;  while  in  the  remainder  of  the  State  it  amounts 
to  32  per  cent. 


go  NATURAL    TAXATION. 

But  if  we  compare  single  counties,  such  as  Hamilton,  in 
which  town  lots  compose  about  85  per  cent,  of  all  the  real 
estate,  with  Medina,  in  which  town  lots  compose  only  10 
per  cent,  of  the  real  estate,  we  find  the  result  as  follows  : 

Ohio   Valuations,  1887. 

Personal 
Real  Estate.         Property. 

Hamilton $163,732,580         $53,144,182 

Medina 8,304,740  5,012,304 

Here  we  find  that  the  real  estate  of  Hamilton  County 
is  assessed  at  twenty  times  the  value  of  Medina  County ; 
while  the  personal  property  of  Hamilton  is  assessed  at 
less  than  eleven  times  that  of  Medina.  Personal  property 
constitutes  24^-  per  cent,  of  the  valuation  of  Hamilton, 
and  37J-  per  cent,  of  the  valuation  of  Medina.  The  total 
exemption  of  personal  property  from  taxation,  therefore, 
would,  if  taxes  were  divided  only  between  the  counties 
of  Hamilton  and  Medina,  relieve  the  farmers  of  Medina 
from  exactly  one  sixth  of  their  present  burdens.  Invari- 
ably, farmers  are  compelled  to  pay  a  much  larger  share  of 
State  taxation,  as  the  result  of  taxing  personal  property. 

§  8.  Taxation  of  credits  heaviest  on  farmers.  But 
let  us  test  this  question  in  still  other  ways.  The  chief 
clamor  in  favor  of  taxing  personal  property  has  been 
directed  toward  the  taxation  of  moneys  and  credits.  The 
money  lender,  who  is  supposed  to  have  vast  sums  on 
deposit  in  bank,  and  the  merchant,  who  is  supposed  to 
have  vast  outstanding  credits  due  from  the  poor  farmers, 
are  the  special  objects  against  whom  this  method  of  taxa- 
tion is  aimed — all  for  the  relief  of  the  farmers.  Let  us 
see  how  this  works,  by  a  comparison  of  the  same  typical 
counties.  The  Ohio  report  for  1887  shows  that  their 
relative  assessments  were  as  follows : 


EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS.      9! 

1887.  Real  Estate.  Money.  Credits,  etc. 

City  counties $317,854,665  $5,328,050         $13,291,833 

Rural  counties 29,733,450  907,829  4,384,381 

Roughly  stated,  it  thus  appears  that  if  taxation  were 
confined  to  real  estate  alone,  the  city  counties  would  pay 
eleven  times  as  much  as  the  rural  counties;  whereas,  if 
taxation  were  levied  on  money  alone,  they  would  pay  less 
than  six  times  as  much,  and  if  levied  on  credits  alone,  a 
little  more  than  three  times  as  much  ;  while,  if  taxation 
were  levied  on  both  money  and  credits,  they  would  pay 
about  four  times  as  much.  Consequently,  the  burden  of 
taxation  in  rural  counties  as  compared  with  the  large 
cities  is  nearly  three  times  as  heavy  on  money  and  credits 
as  it  is  on  real  estate.  The  only  result,  tJierefore,  of  taxing 
money,  credits,  and  similar  investments,  is  to  relieve  the  bur- 
den of  tJie  cities  and  increase  the  burden  of  the  farms. 

Let  us  test  this  particular  illustration  by  comparing 
the  County  of  Hamilton,  in  which  town  lots  are  worth 
seven  times  as  much  as  farm  lands,  with  Geauga,  in  which 
farm  lands  are  worth  twenty-seven  times  as  much  as  town 
lots: 

1887.  Real  Estate.  Money.  Credits. 

Hamilton      $162,732,580  $1,833,279  $,735,945 

Geauga 5, 555, 800  282,118  534,477 

Roughly  stated,  Hamilton  County  is  assessed  for  nearly 
thirty  times  as  much  real  estate,  less  than  seven  times  as 
much  money,  and  less  than  eleven  times  as  much  credits 
as  Geauga  County.  If  taxation  were  levied  exclusively 
upon  money  on  hand,  Geauga  County  would  pay  between 
four  and  five  times  as  much  as  it  would  if  the  taxes  were 
levied  exclusively  on  real  estate.  If  taxes  were  levied 
solely  upon  credits,  Geauga  would  pay  nearly  three  times 
as  much  as  it  would  if  they  were  levied  solely  on  real 


92  NATURAL    TAXATION. 

estate.  There  is  not  much  evidence  here  of  any  advan- 
tage gained  by  the  farmer,  through  his  diligent  search 
after  the  money  lender  and  the  creditor. 

§9.  The  more  effective  the  system,  the  worse  for 
the  farmers.  For  many  years,  and  in  fact  persistently 
ever  since  1846,  when  Ohio  adopted  the  present  system 
of  taxation,  Ohio  farmers  have  been  clamoring  more  and 
more  loudly  for  protection  from  unjust  taxation,  for 
greater  burdens  upon  merchants  and  bankers,  and  for 
more  stringent  enforcement  of  the  law.  The  tax  and 
assessment  laws  have  been  amended,  again  and  again,  in 
obedience  to  this  demand  ;  and  State  officers  have  been 
continually  more  persistent  in  their  efforts  to  shift  the 
burden  of  taxation  from  farmers  to  capitalists,  by  means 
of  a  rigorous  enforcement  of  taxation  upon  personal  prop- 
erty. A  spy  law  has  been  enacted,  giving  20  per  cent, 
or  more  to  any  spy  who  will  expose  false  returns  of  per- 
sonalty. Let  us,  therefore,  inquire  whether  there  is  any 
tendency  to  improvement  in  these  respects,  and  whether 
the  history  of  the  last  few  years  encourages  the  hope  that 
the  evasions  of  the  "  Shylocks  "  can  be  put  an  end  to  and 
the  honest  farmer  relieved  by  a  more  thorough  assess- 
ment of  personal  property.  For  this  purpose  let  us  again 
compare  the  typical  counties  of  Hamilton  and  Geauga — 
the  former  having  an  almost  exclusively  city  population 
and  the  latter  being  occupied  almost  exclusively  by  fann- 
ers, having  no  village  with  more  than  1000  inhabitants. 

§10.  Watches,  carriages,  and  money.  If  there  are 
any  items  in  which  the  Shylocks  ought  to  make  a  better 
showing  than  the  farmers,  surely  watches,  pleasure  carri- 
ages, money  on  hand,  and  credits  would  stand  first  on  the 
list.  Let  us  take  them  in  succession  : 

Number  of  \Vatches.          1882.  1887. 

Ohio 118,286  114,631 

Hamilton 9,283  8,659 

Geauga 845  922 


\       f;  Af 

"     OF   THT? 

TJNIVERSIT 

EFFECT  OF  THE  PERSONALTY  TAX  ON  FAR 

These  statistics  tell  a  sorrowful  tale  of  poverty  and 
destitution  among  the  poor  farmers  of  Cincinnati;  while 
they  indicate  that  the  bloated  capitalists  of  Geauga 
County  are  the  chief  patrons  of  the  fine  watchmakers  of 
Paris  and  Geneva.  Let  us  turn  from  this  sorrowful  pic- 
ture to 

Pleasure  Carriages.          1882.  1887. 

Ohio 254,918  224,440 

Hamilton I3,?io  9,854 

Geauga 2,488  1,717 

Here  one  finds  some  slight  relief,  not,  indeed,  in  the 
increasing  prosperity  of  any  part  of  Ohio,  but  in  the  fact 
that  the  poor  farmers  of  Cincinnati  do  not  seem  to  have 
given  up  any  larger  proportion  of  their  pleasure  carriages 
than  the  Shylocks  of  Geauga  ;  while  a  desolating  wave  of 
poverty  has  swept  over  the  entire  State,  resulting  in  the 
loss  of  nearly  one  eighth  of  all  its  vehicles.  Walking  is 
evidently  becoming  fashionable  in  Ohio.  Let  us  look  at 

Money  on  Hand.  1882.  1887. 

Ohio $46,160,629  $35,132,131 

Hamilton 2,321,502  1,833,279 

Geauga ,         352,053  282,118 

Here,  again,  a  wave  of  poverty  has  flooded  the  whole 
State,  in  tolerably  equal  proportions.  Money  is  evidently 
rapidly  vanishing  ;  for  the  total  stock  of  the  State  has 
fallen  off  $11,000,000  in  five  years,  diminishing  25  per 
cent,  in  Hamilton,  but  only  20  per  cent,  in  Geauga.  We 
will  now  look  at 

Credits.  1882.  1887. 

Ohio $104,838,938  $106,173,894 

Hamilton 6,571,829  5,735,945 

Geauga 560,693  534,477 

Here  we  see  that  Ohio,  as  a  state,  is  a  money  lender  to 
the  extent  of  one  per  cent,  more  in  1887  than  in  1882. 
But  again  the  poor  agriculturists  of  Cincinnati  come  to. 


94  NATURAL  TAXATION. 

the  front,  with  a  loss  of  $836,000,  or  12^  per  cent,  of 
their  total  stock;  while  the  loss  in  Geauga  County  is  only 
about  one  third  as  much,  or  a  trifle  over  4  per  cent. 

§11.  How  Ohio  watches  go.  In  reviewing  this  sad 
picture  of  decline,  one  is  reminded  of  Goldsmith's  melan- 
choly words  : 

"  Where  wealth  accumulates  and  men  decay." 

But  in  Ohio  it  appears  that  men  accumulate  and  wealth 
decays  ;  for  the  population  of  the  State  has  largely  in- 
creased, while  its  wealth  is  apparently  ebbing  away. 
Truly  was  it  said  by  the  wise  man  of  old,  that  "  riches 
have  wings  "  ;  for  the  disappearance  of  money  from  Ohio 
conclusively  proves  it.  Looking  at  the  returns  of  car- 
riages, one  is  tempted  to  think  that  the  principal  reason 
why  they  have  wheels  is  to  enable  the  owners  to  take 
them  out  of  Ohio  ;  and  as  for  the  watches,  they  are  cer- 
tainly not  open  to  the  accusation  so  often  brought  against 
French  clocks,  that  they  will  "  never  go."  Ohio  watches 
certainly  can  and  do  "  go,"  with  a  rapidity  and  steadiness 
not  often  equalled.1 

§  12.  Ohio  in  1892.  The  foregoing  statistics  were  pre- 
pared in  1889;  and  as  no  substantial  change  has  taken 
place  in  the  methods  or  success  of  Ohio  taxation,  it  has 
not  seemed  worth  while  to  go  to  the  trouble  of  correcting 
these  statistics  by  the  latest  information.  But  to  prove 
that  these  figures  are  just  as  applicable  now  as  they  were 
in  1887,  a  few  statistics  will  be  given  from  the  official  re- 
ports of  1892. 

1  The  speed  of  Cincinnati  watches  has  lately  increased.  The  latest  report 
shows  that  2Oper  cent,  have  "  gone,"  in  the  last  six  years,  against  only  8  per 
cent,  in  the  previous  six  years.  The  speed  of  Ohio  carriages  is  even  greater  ; 
25  per  cent,  having  gone  in  six  years.  The  honest  farmers  have  taken  the 
hint,  and  have  dropped  58,000  carriages  out  of  sight — of  the  assessors. 
Perhaps  the  owners  have  taken  to  bicycles  instead. 


EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS.      95 

By  authority  of  the  Legislature  of  Ohio,  Hon.  Wm. 
McKinley,  Governor  of  that  State,  appointed  a  tax  com- 
mission of  four  members ;  two  being  Republicans  and  two 
Democrats,  but  all  professing  themselves  in  favor  of  con- 
tinuing the  tax  on  personal  property.  Their  report,  pre- 
sented to  the  Governor  on  December  23,  1893,  confirms 
all  which  has  been  said  above.  It  shows,  moreover,  that 
the  disproportion  between  burdens  imposed  by  the  tax  on 
personal  property  upon  the  cities  and  upon  the  farming 
districts,  respectively,  has  increased  considerably  since 
1887.  A  few  comparisons  are  here  given  between  the 
assessments  in  1887  and  1892  in  Hamilton  and  Geauga 
Counties  respectively. 

Money  on  Hand, 

County.                  1882.                  1887.  1892. 

Hamilton $2,321,502         $1,833,279  $1,535,375 

Geauga 352,053               282,118  451,567 

Here  it  will  be  seen  that  the  amount  of  taxable  money 
reported  in  Geauga,  which  is  a  purely  farming  district, 
has  largely  increased,  owing  to  the  spy  system  established 
by  the  State.  But  the  amount  of  taxable  money  reported 
in  Hamilton  County,  which  includes  the  great  city  of  Cin- 
cinnati, has  again  largely  decreased  ;  the  spy  system  hav- 
ing entirely  failed  there. 

We  will  now  compare  results  in 

Credits. 
County.  1882.  1887.  1892. 

Hamilton $6,571,029        $5,735,945  $4,289,901 

Geauga 560,693  534,477  507,651 

Although  there  has  been  a  shrinkage  of  about  5  per  cent, 
in  the  taxable  credits  of  Geauga,  since  1887,  that  is  noth- 
ing, compared  with  the  28  per  cent,  reduction  in  Cin- 
cinnati. 

The  Tax  Commission  Report   gives   many  other  most 


g6  NATURAL    TAXATION. 

instructive  figures ;  too  many  to  be  repeated  here.  To 
mention,  however,  a  few  examples,  it  appears  that  the 
County  of  Lucas,  which  contains  "  the  flourishing  city  of 
Toledo,"  is  rapidly  increasing  in  population,  and  has  more 
than  double  the  stationary  population  of  Muskingum 
County,  nevertheless  returned  in  1892  very  much  less 
than  half  as  much  intangible  personal  property  for  taxa- 
tion, little  more  than  one  third  as  much  in  credits,  and 
not  nearly  one  third  as  much  in  money.  Thus  the  rural 
county  is  taxed  thrice  as  heavily  as  the  city.  The  County 
of  Cuyahoga,  including  the  great  city  of  Cleveland,  the 
population  of  which  is  rapidly  increasing,  and  is  already 
about  twenty-five  times  as  large  as  that  of  Geauga  County, 
returned  for  taxation  less  than  four  times  as  much  money, 
and  much  less  than  seven  times  as  much  credits.  Thus 
Geauga  was  taxed,  upon  these  values,  about  five  times  as 
heavily  as  Cuyahoga. 

The  net  result  of  all  the  comparisons  made  by  the  com- 
missioners, between  city  and  farming  districts,  is  to  prove 
that  the  tax  upon  personal  property  makes  fanners  pay  from 
$4  to  $7,  where  it  makes  city  residents  pay  $i. 

The  preposterous  nature  of  returns  of  personal  prop- 
erty for  taxation  is  further  illustrated  in  the  report  of  the 
Commission,  by  comparison  of  the  amounts  of  money  on 
hand  or  on  deposit,  thus  returned,  with  the  amounts  ac- 
tually held  on  deposit  in  banks,  within  the  cities  making 
these  returns.  The  following  examples  will  show  the 
general  drift. 

Deposits  (Partly  Estimated}. 

1892.  Deposits  in  Bank.  Deposits  Taxed. 

Cincinnati $29,000,000  $1,300,000 

Cleveland 63,000,000  1,000,000 

Toledo 8,120,000  253,000 


'  EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS.      97 

Here  again  the  farmers  come  to  the  front,  to  bear  their 
share  of  taxation  with  a  generous  hand  ;  for  while  five 
counties,  containing  all  the  large  cities,  held  on  deposit  in 
banks  $120,000,000,  and  returned  for  taxation  only  $6,000,- 
ooo,  the  remainder  of  the  State,  including  all  the  farm- 
ing districts,  having  only  $70,000,000  in  banks,  returned 
for  taxation  over  $32,000,000.  That  is,  having  40  per  cent. 
less,  they  were  taxed  450  per  cent,  more  !  So  the  tax  on 
"  money  "  bears  upon  farmers  about  ten  times  as  heavily  as 
upon  city  residents. 

§  13.  Conclusions  of  the  Commission.  No  wonder 
that  the  Commission,  after  giving  many  more  illustra- 
tions, concluded  by  saying  :  "  It  is  useless  to  pursue  this 
subject  further  .  .  .  While  in  the  country  counties 
.  .  .  taxation  of  intangible  property  is  perhaps  feasible, 
it  is  in  city  counties  an  utter  failure.  .  .  .  It  is  con- 
fidently believed  that  no  appreciable  part  of  the  intangi- 
ble property  existing  in  the  city  counties  is  reached  by 
our  method  of  taxation.  //  is  the  country  counties  which 
pay  the  taxes  upon  personal  property." 

The  Commissioners  further  say  :  "  It  is  to  be  remem- 
bered that  we  have  in  this  State  an  extremely  rigid  sys- 
tem." They  show  that  personal  property  is  pursued  with 
more  severity  and  ingenuity  in  Ohio  than  in  any  other 
State  ;  and  notwithstanding  all  this,  they  declare  that  the 
system  is  "  an  utter  failure,"  and  that  even  with  the  re- 
spect to  the  spy  law  of  Ohio,  "  this  scheme,  like  all  other 
attempts  to  reach  intangible  property,  follows  the  universal 
law  .  .  .  that  the  large  cities  escape,  and  the  country 
counties  feel  its  burden."  Again  they  say  :  "  The  sys- 
tem as  it  is  actually  administered  results  in  debauching 
the  moral  sense.  It  is  a  school  of  perjury.  It  sends  large 
amounts  of  property  into  hiding.  It  drives  capital  in 
large  quantities  from  the  State.  ,  .  f  The  moral  sense 


98  NATURAL    TAXATION. 

of  the  community  is  blunted  ;  its  citizens  are  made  familiar 
with  all  manner  of  evasion  ;  they  are  taught  to  lie." 

§  14.  Experience  of  Missouri.  Lest  it  should  be 
imagined  that  the  experience  of  Ohio  is  peculiar,  let  us 
inquire  into  the  experience  of  Missouri,  which  is  even 
more  decidedly  than  Ohio  an  agricultural  State.  In 
Missouri  there  are  only  four  cities  of  over  15,000  popula- 
tion, and  only  three  of  over  25,000.  Only  four  counties 
show  a  decided  preponderance  of  town-lot  values  over 
farm  values  ;  and  only  two  more  even  the  smallest  differ- 
ence that  way,  and  those  for  one  year  only. 

The  four  counties  in  which  all  cities  worthy  of  the 
name  are  situated,  are  Buchanan,  Greene,  Jackson,  and 
St.  Louis  City.  These  we  will  call  the  city  counties  and 
the  others  the  rural  counties.  The  following  are  the 
official  and  latest  published 

Missouri  Valuations,  1893  (in  Thousands  of  Dollars}. 


Farm  Lands.     Town  Lots.       ,  p 

Real  Estate.  Property. 

4  city  counties  ----     29,572  320,177  349,749  70,161 

101  rural  counties.    277,348  67,524  344,872  159,514 


Total 306,920  387,701  694,621  229,675 

Here  it  can  be  seen  at  a  glance  that  the  four  cities,  with 
their  adjoining  counties,  in  which  farms  form  much  less  than 
one  tenth  of  the  whole  value  of  real  estate,  pay  taxes  on 
more  than  one  half  of  all  the  real  estate  in  Missouri,  but 
on  much  less  than  one  third  of  its  personal  property.  Per- 
sonal property  in  the  cities  amounts  to  less  than  20  per 
cent,  of  their  real  estate ;  while  in  the  rural  counties  it 
amounts  to  46  per  cent,  of  real  estate.  The  farmers  of 
Missouri  pay  i^-  per  cent,  less  taxes  on  their  land  than  the 
cities  pay,  but  127  per  cent,  more  on  personal  property. 
Even  in  the  eight  poorest  counties  in  Missouri,  where 
farm  lands  are  worth  from  twenty  to  one  hundred  times 


EFFECT  OF  THE  PERSONALTY  TAX  ON  FARMERS.      99 

as  much  as  town  lots,  personal  property  is  assessed  at  40 
per  cent,  of  real  estate ;  so  that  the  poorest  farmers  of  the 
State  pay  100  per  cent,  more  taxes  on  personal  property 
than  do  the  richest  cities,  in  proportion  to  their  real 
estate. 

Let  us  compare  St.  Louis  City  with  the  rest  of  the 
State  : 

Missouri  Assessments,  1893. 

Real  Estate.  Personalty.  Money,  Notes,  etc. 

St.  Louis $259,781,100  $44,341,110  $8,449,790 

Rest  of  State 434,839,557  185,334,285  67,663,576 

Total '$694,620,657  $229,675,395  $76,113,366 

These  figures  show  that,  while  St.  Louis  pays  about  40 
per  cent,  of  the  taxes  on  real  estate,  it  pays  less  than  20 
per  cent,  of  the  taxes  on  all  personal  property,  and  just 
ii  per  cent,  of  the  taxes  on  money  and  credits.  The  rest 
of  the  State  pays  70  per  cent,  more  on  land  than  St. 
Louis  does,  but  318  per  cent,  more  on  personal  property 
in  general,  and  exactly  700  per  cent,  more  on  money  and 
credits !  Yet  Missouri  is  governed  entirely  by  the  farm 
vote,  and  it  "  enjoys  "  a  general  property  tax  as  severe 
and  all-reaching  as  the  farmers  are  able  to  invent.  The 
only  result  of  their  ingenuity  is,  as  usual,  to  load  heavier 
burdens  upon  their  own  shoulders. 

§  15.  The  moon-struck  theorists.  Figures  like  these 
might  be  collected,  not  only  from  Ohio  and  Missouri,  but 
from  every  State  and  country  under  the  sun,  where  statis- 
tics are  kept  and  personal  property  is  taxed.  They  are 
the  moon-struck  theorists,  who,  in  defiance  of  all  the  facts 
and  all  the  experience  of  the  world,  persist  in  the  vain 
endeavor  to  tax  personal  property  and  in  the  absurd  asser- 
tion that  this  form  of  taxation  tends  to  relieve  farmers. 

Farmers  cannot  conceal  their  sheep  and  oxen,  their 
plows  and  implements  ;  and  they  have  enormous  difficulty 
in  concealing  their  wealth  in  any  form,  because  their 


100  NATURAL    TAXATION. 

affairs  are  so  well  known  to  all  their  neighbors.  If  they 
have  any  money  in  bank,  all  the  village  knows  it.  If 
they  have  loaned  money  or  sold  goods  on  credit,  their 
debtor  is  pretty  sure  to  be  some  one  in  the  immediate 
neighborhood ;  and  all  the  circumstances  are  known  to 
fifty  people.  The  average  farmer,  when  making  his  re- 
turns to  the  assessor,  is  afraid  to  understate  his  wealth 
very  greatly  ;  because  he  could  hardly  look  the  assessor  in 
the  face  after  doing  so,  being  conscious  that,  if  the  assess- 
or does  not  already  know  the  truth,  he  can  with  very 
little  difficulty  find  it  out  for  himself.  But  in  large  towns 
and  cities  scarcely  any  man  knows  intimately  the  affairs 
of  his  neighbor ;  and  the  assessor  knows  least  of  all.  Peo- 
ple are  reputed  to  be  worth  $1,000,000,  who  in  reality  are 
not  worth  $50,000  ;  and  others  are  reputed  to  be  worth 
only  $100,000,  who  in  reality  are  worth  $2,000,000.  Even 
if  the  amount  of  any  man's  wealth  is  approximately 
known,  none  of  his  neighbors  know  how  that  wealth  is 
invested,  unless  it  is  put  in  real  estate.  City  assessors, 
therefore,  have  absolutely  no  means  of  ascertaining  the 
value  of  any  man's  personal  property,  except  by  returns 
from  that  man  himself,  or  from  the  corporations  with 
whom  he  may  happen  to  invest.  If  an  Ohio  man  makes 
his  principal  investments  in  corporations  outside  of  the 
State,  the  assessor  is  entirely  at  the  mercy  of  the  tax- 
payers. He  can  tell  any  number  of  lies  with  impunity. 
The  assessor  rarely  or  never  examines  his  books  of  ac- 
count ;  and  if  assessors  once  began  to  make  such  an  ex- 
amination, many  rich  men  would  cease  to  keep  books  of 
account  at  all,  as  it  is  notorious  that  they  did  when  the 
income  tax  was  in  existence  between  1864  and  1872.  All 
things  combine  to  make  it  easy  for  the  assessor  to  reach 
the  farmer's  personal  property,  and  difficult  for  him  to 
reach  that  of  the  merchant,  banker,  or  city  capitalist. 


CHAPTER    VII. 
TAXATION  OF  WOMEN  AND  CHILDREN. 

§  i.  Women   and  children  fully  taxed.     One  of  the 

worst  features  of  the  tax  on  personal  property  is  that  it 
always  and  everywhere  bears  with  peculiar  severity  upon 
women  and  children.  Their  lot  would  be  hard  enough, 
even  if  they  paid  no  more  than  their  equal  share,  in  pro- 
portion to  their  means  ;  because  none  of  them  have  the 
same  power  to  replace  the  tax  by  fresh  earnings,  which 
men  have,  and  most  women  and  nearly  all  children,  who 
are  reached  by  this  tax,  have  no  such  power  at  all.  Most 
women  thus  taxed  are  widows,  who  have  spent  their 
lives  in  the  family,  and  have  no  training  for  any  occupa- 
tion outside  of  the  home.  Their  husbands  or  fathers 
have  left  them  a  little  wealth,  upon  which  to  support  them- 
selves and  their  children.  Even  the  most  equally  appor- 
tioned taxation  inflicts  upon  them  a  loss  for  which  they 
can  have  no  remedy,  such  as  a  man  has,  in  some  new  effort 
of  industry. 

But  to  that  extent  the  burden,  while  it  calls  for  sympa- 
thy, does  not  make  any  claim  upon  absolute  justice.  Far 
otherwise  is  it  with  the  inequality  of  taxation  which  im- 
poses upon  women  and  children  a  burden  rarely  less  than 
twice  and  frequently  four  or  five  times  as  heavy  as  that 
which  it  imposes  upon  active  business  men.  It  is  this, 
and  only  this,  to  which  attention  is  now  invited. 


IO2  NATURAL    TAXATION. 

§  2.  Taxation  of  women,  through  trustees.  All  per- 
sonal property  of  children,  most  of  the  personal  property 
of  widows,  and  a  large  proportion  of  that  held  for  other 
women,  are  held  in  the  names  of  trustees.  Probably  nine 
tenths  of  these  trust  estates  are  created  by  the  wills  of  de- 
ceased persons.  All  such  trusts  pass  through  courts  of 
probate ;  the  wills  are  recorded  for  public  inspection  ;  the 
courts  always  can  and  generally  do  require  a  full  state- 
ment of  the  value  of  the  property  to  be  filed  ;  accounts 
of  its  disposition  are  also  filed  ;  and  all  of  these  records 
are  freely  open  to  the  assessors.  It  inevitably  follows 
that  such  estates  are  assessed  to  their  full  value.  Some 
friend  of  the  testator  is  usually  made  executor  and  trustee. 
Will  he  take  a  false  oath,  simply  to  protect  the  widow 
and  children  of  his  best  friend  from  taxation  ?  Every 
consideration  of  patriotism,  of  manhood  and  piety  gives 
him  a  chill  of  horror  at  the  bare  thought  !  Never,  while 
an  American  heart  beats  true  within  his  manly  bosom, 
will  he  commit  the  smallest  perjury,  for  the  benefit  of  any 
one — except  himself.  Not  even  the  most  hardened  pro- 
fessional oath-taker  will  degrade  his  honor  by  such  treach- 
ery to  his  country  and  such  defiance  of  his  Maker.  For 
how  can  he  ask  the  widow  to  compensate  him  for  such  a 
service  ?  And  shall  he  put  his  immortal  soul  in  peril  for 
nought?  No  :  the  executor  of  any  will,  who  is  not  also 
the  principal  legatee,  may  be  trusted  implicitly  to  make 
a  true  return. 

Thus  the  personal  property  of  most  women  and  of  all 
children  is  correctly  reported  in  a  place,  where  the  assess- 
ors cannot  help  seeing  the  report.  For  one  year,  at  least, 
it  is  taxed  up  to  its  full  value. 

Nor  does  the  matter  end  there.  The  assessors,  being 
once  on  the  track,  keep  in  pursuit.  Unless  some  great 
change  is  made  in  the  nature  of  the  investments,  the  tax 


TAX  A  TION  OF  WOMEN  AND   CHILDREN.  1 03 

is  never  reduced.  The  property  of  all  children  and  of 
most  women  is  held  permanently  by  trustees.  Such  trus- 
tees are  confined  strictly  to  a  limited  class  of  investments, 
most  of  which  are  taxable  ;  while  such  as  are  not  produce 
a  very  small  income.  Trustees  have  no  power  to  evade 
taxation  by  running  into  debt.  They  are  required  to  make 
oath  to  annual  returns  of  the  taxable  property  in  their 
charge  ;  and  this  duty  they  perform  with  the  same  pious 
conscientiousness  which  characterized  their  first  returns. 
All  property  held  in  trust  is  therefore  taxed  for  every 
dollar  which  it  is  worth,  with  few  exceptions.  Instances 
have  been  known  where  trustees  have  been  base  enough 
to  evade  taxation  upon  trust  funds,  for  the  sole  benefit  of 
those  who  are  dependent  upon  their  aid,  without  even 
the  compensation  of  thanks  from  their  innocent  and  un- 
suspecting beneficiaries.  But,  for  the  honor  of  human  na- 
ture, let  us  hope  that  such  gratuitous  wickedness  is  rare. 

§  3.  Women's  tax  returns  honest.  If  a  widow  is 
herself  sole  executrix,  she  never  thinks  of  taking  a  false 
oath,  to  evade  taxation ;  and  she  has  never  learned 
the  art  of  so  arranging  her  investments  as  to  avoid  taxa- 
tion. But  if  she  had,  she  could  not  collect  her  thoughts 
sufficiently,  in  the  first  sense  of  her  loss,  to  exercise  her 
shrewdness  immediately  upon  offering  her  husband's  will 
for  probate.  Until  the  will  is  proved,  she  cannot  touch 
the  property  ;  and  therefore  it  must  be  and  is  filed  speed- 
ily after  her  husband's  death.  At  the  same  time,  an  affi- 
davit of  the  value  of  the  estate  must  be  filed  ;  and  this  is 
sharply  scrutinized  by  officials,  whose  sole  anxiety  is  to 
get  taxes  for  the  State,  and  who  are  certainly  not  open  to 
small  bribes,  nor,  generally  speaking,  to  large  ones.  But 
if  they  were,  the  widow  would  not  know  how  to  reach 
them.  Widows'  returns,  therefore,  are  always  true. 

In  many  cases  widows  and  sisters  receive  bequests  free 


IO4  NATURAL    TAXATION. 

of  trust.  The  result,  however,  is  not  materially  different. 
They  seek  advice  from  the  most  honest  man  whom  they 
know  ;  and  how  can  he  look  them  in  the  face,  while  advis- 
ing them  to  resort  to  the  usual  methods  of  evading  taxa- 
tion? Or,  if  he  does,  how  can  they  carry  out  his  advice? 
They  are  generally  too  simple-minded  to  want  such  advice 
or  to  act  upon  it,  if  given.  Widows  and  their  daughters 
can  be  seen  in  every  tax  office,  asking  advice,  in  their  sim- 
plicity, from  the  tax  collectors,  as  to  what  they  ought  to 
return  for  taxation.  The  writer  has  witnessed  such  scenes, 
and  has  heard  the  officials  give  advice,  in  fatherly  tones, 
calling,  not  merely  for  a  return  of  the  last  penny  which 
the  victims  possessed,  but  also  for  returns  of  property 
which  had  been  declared  exempt  by  the  highest  judicial 
tribunal  of  the  State.  Noble  public  servants !  They 
would  extract  the  last  drop  of  a  widow's  blood,  for  the 
profit  of  the  government  to  which  their  loyalty  is  due ! 

§  4.  Women  taxed  :  men  relieved.  Contrast  the  sit- 
uation of  these  helpless  women  with  that  of  the  average 
man.  His  property  is  in  his  own  hands.  No  probate 
court  keeps  any  record  of  it ;  or,  if  it  has  come  to  him 
through  the  court,  he  speedily  makes  such  changes,  real 
or  nominal,  in  the  form  of  investments,  as  enable  him 
truthfully  to  say  that  none  of  the  original  investments 
remain.  In  those  States  where  deductions  for  debt  are 
allowed,  he  can  run  into  debt,  to  some  complacent  friend, 
to  an  amount  sufficient  to  relieve  him  entirely  from  taxa- 
tion. In  other  States,  he  can  give  away  substantially  all 
his  taxable  personable  property  on  the  day  before  assess- 
ment day,  taking  it  back  the  next  day.  Or,  if  not  shrewd 
enough  or  trustful  enough  to  arrange  his  affairs  in  any  of 
these  ways,  he  can  get  rid  of  most  of  the  tax  by  simply 
taking  a  false  oath.  That  such  oaths  are  taken  in  enor- 
mous numbers,  wherever  they  are  necessary  to  escape  tax- 


TAXATION  OF  WOMEN  AND   CHILDREN.  1 05 

ation,  is  proved  by  the  universal  testimony  of  assessors, 
in  every  part  of  the  country.  It  is  proved  more  conclu- 
sively, by  reference  to  the  tax  returns  of  Ohio  and  Cali- 
fornia, elsewhere  given. 

The  general  result  is  that,  while  women  and  children 
are  taxed  upon  nearly  the  full  value  of  all  taxable  per- 
sonal property  in  their  possession,  men  are  taxed  upon  less 
than  one  third  of  similar  property  belonging  to  them  ; 
while  the  great  majority  of  men  pay  taxes  upon  a  far 
smaller  proportion  than  that.  The  effect  is  to  make 
women  and  children  pay,  at  the  very  least,  three  times  as 
large  a  share  of  such  taxes  as  is  paid  by  men. 

It  is  difficult  to  speak  with  moderation  of  such  methods 
and  such  results.  Yet  a  recital  of  such  iniquities  is  listened 
to  by  the  very  best  Americans  with  perfect  calmness,  and 
by  legislators  with  stolid  indifference.  The  story  of  rob- 
bery, under  the  forms  of  law,  in  these  cases,  is  usually  dis- 
missed with  a  cheap  and  vulgar  sneer  at  "  widows  and 
orphans."  The  hearts  of  our  people  are  hardened  by  the 
universal  injustice,  oppression,  and  iniquity  of  our  methods 
of  taxation.  "  None  calleth  for  justice  ;  nor  any  pleadeth 
for  truth."  ' 

1  Isaiah,  lix.,  4. 


CHAPTER   VIII. 
TAXATION  OF  IMPROVEMENTS. 

§i.  Should  improvements  be  taxed?  Buildings  and 
most  other  improvements  upon  land  are  easily  visible, 
and  they  cannot  easily  be  removed  ;  and  therefore  it  seems 
to  most  superficial  thinkers  that  such  improvements  are 
certainly  proper  subjects  for  direct  taxation. 

But  it  is  obvious  that  most  of  the  reasons  for  the 
exemption  of  visible  chattels  from  taxation  apply  with 
equal  force  to  improvements  upon  land.  These  are  really 
nothing  but  chattels  attached  to  land  ;  and  the  fact  that 
they  are  so  attached  makes  no  difference  in  their  real 
nature,  and  should  not  lead  to  their  taxation. 

A  little  consideration  will  make  it  clear  that  a  tax  upon 
improvements  is  not,  in  the  long  run,  a  strictly  direct  tax. 
If  the  building  taxed  is  occupied  by  the  owner  as  a  resi- 
dence the  tax  is  levied  upon  and  in  proportion  to  his 
living  expenses,  just  like  a  strictly  revenue  tariff.  If  he 
occupies  it  only  for  business  purposes  the  tax  must,  in 
the  long  run,  be  added  to  his  ordinary  business  profits  ; 
otherwise  he  would  be  driven  out  of  business  by  the  com- 
petition of  others,  who  were  able  to  recover  such  taxes 
from  their  customers.  If  he  rents  the  building  to  others 
they  must  repay  the  tax  ;  otherwise  no  one  would  put  up 
new  buildings  to  supply  the  demand  of  increasing  popu- 
lation. Thus  in  any  case  taxes  upon  improvements  are 

106 


TAXATION  OF  IMPROVEMENTS.  1 07 

indirect  taxes,  which  must  be  in  the  end  repaid  to  the 
original  taxpayer,  with  a  profit  out  of  the  earnings  of  the 
masses.  Like  tariff  taxes,  they  are  eventually  paid  by 
men  in  proportion  to  what  they  spend,  not  what  they 
have.  They,  therefore,  bear  with  far  more  severity  upon 
the  poor  than  upon  the  rich ;  and  they  tend,  like  tariff 
taxes,  to  increase  the  inequality  between  the  two  classes. 

Moreover,  the  value  of  buildings  and  other  improve- 
ments upon  land  cannot  be  assessed  with  even  approxi- 
mate equality,  by  the  most  honest  assessors.  The  value 
of  the  rich  man's  house  will  inevitably  be  under-esti- 
mated ;  while  the  value  of  the  multitude  of  cheap  houses 
will  be  relatively,  if  not  actually  over-estimated.1  The 
tax  on  improvements,  therefore,  like  that  on  personal 
property,  is  not  a  really  direct  tax  ;  and  it  cannot  be  fairly 
apportioned  among  the  taxpayers.  These  taxes  are  as 
bad  as  a  tariff  for  revenue,  because  they  fall  upon  con- 
sumption and  are  paid  chiefly  by  the  poor ;  and  they  are 
worse  than  such  a  tariff,  because  they  cannot  be  as  hon- 
estly and  efficiently  collected. 

There  is  but  one  reasonable  excuse  for  taxing  build- 
ings and  improvements  upon  land,  when  personal  prop- 
erty is  not  taxed.  They  cannot  run  away.  All  other 
objections  to  taxes  on  visible  chattels  apply  with  equal 
force  to  taxes  on  chattels  affixed  to  land. 

§  2.  Tax  upon  all  improvements  indirect.  Intelligent 
residents  of  cities  have  so  long  been  accustomed  to  the 
idea  that  taxes  upon  buildings  distribute  themselves 
among  tenants,  that  it  will  meet  with  ready  acceptance. 
But  when  we  go  further  and  assert  that  taxes  upon  the 
value  of  other  improvements,  and  especially  upon  the 

1  This  is  true  everywhere.  But  it  has  been  shown,  conclusively  and  in 
detail,  that  this  unjust  discrepancy  is  carried  to  an  enormous  extent  in 
Chicago. 


1 08  NA  TURAL    TAX  A  7 1O  \  . 

value  added  to  land  by  cultivation,  is  not  a  direct  tax,  but 
distributes  itself  in  the  same  way,  the  doctrine  will  be 
considered  novel.  The  vast  majority  of  farm  owners  and 
farm  hirers  have  never  thought  of  such  a  thing.  Yet  the 
one  proposition  must  be  as  true  as  the  other.  Let  us 
candidly  inquire  into  the  facts. 

Our  first  inquiry  must  be  into  the  nature  and  average 
value  of  the  class  of  improvements  now  referred  to,  which 
may  perhaps  be  called  "absorbed  improvements,"  since 
they  are  so  completely  absorbed  into  the  land  as  to  be 
inseparable  from  it.  Buildings  can  be  torn  down.  Fences 
can  be  removed.  But  the  value  added  by  plowing,  stub- 
bing, clearing,  manuring,  pasturing,  and  cultivation  cannot 
suddenly  be  taken  away.  Even  fences  cannot  profitably 
be  carried  off ;  and  drains  or  similar  works  cannot  be 
removed,  although  they  may  be  destroyed.  The  average 
value  of  such  improvements,  entirely  exclusive  of  build- 
ings, is  shown  to  be  $40  per  acre,  in  Massachusetts J ;  and 
it  can  hardly  be  less  than  $20  per  acre  in  any  place  where 
the  work  of  cultivation  has  been  thoroughly  done. 

Dealing  first  with  the  case  of  the  tenant,  and  assuming 
the  improvement  of  the  land  to  have  been  made  or  paid 
for  by  the  landlord,  it  would  seem  to  be  just  as  certain  that 
the  average  rate  of  interest  upon  this  added  value  must 
be  paid  by  the  tenant,  in  addition  to  the  mere  ground 
rent,  as  that  such  interest  must  be  paid  upon  the  value  of 
a  dwelling-house.  For,  if  all  farm  tenants  combine  to 
refuse  such  payment,  all  farm  landlords  will  cease  to  make 
such  improvements.  The  process  of  enforcing  payment 
of  this  increased  rent  might  be  much  slower  than  the  like 
process  with  respect  to  buildings ;  but  the  end  would 
surely  be  the  same.  This  being  conceded,  how  could 
there  be  any  difference  with  regard  to  taxes  on  these 
1  Census  1885  ;  vol.  3,  p.  xlviii.  . 


TAXATION  OF  IMPROVEMENTS.  109 

improvements?  If  the  landlord  had  to  pay  such  taxes, 
without  being  able  to  recover  them  from  his  tenant,  his 
interest  upon  the  investment  would  fall  below  the  rate 
which  he  could  obtain  upon  other  property;  and  he  would 
cease  to  invest  in  farm  improvements.  Gradually,  new 
tenants  would  find  no  improved  farms  ready  for  them  ; 
and  they  would  offer  to  pay  taxes  and  interest  on  improve- 
ments of  all  kinds.  The  tenants'  supposed  combination 
would  thus  be  broken  ;  and  the  tax  would  be  shifted  upon 
all  tenants. 

Dealing  next  with  the  community  at  large,  it  would 
seem  obvious  that  the  tax  upon  such  improvements,  quite 
as  much  as  the  tax  upon  factories,  mills,  or  shops,  would 
be  ultimately  added  to  the  cost  of  production  and  would 
be  distributed  among  the  consumers  of  farm  products, 
just  as  surely,  in  the  long  run,  as  taxes  upon  imported 
goods  or  home-made  whisky.  Undoubtedly,  it  would 
take  a  long  time  to  complete  the  transfer,  if  taxes  upon 
improvements  were  newly  imposed.  But  as  they  have 
been  collected  regularly,  for  time,  whereof  the  memory  of 
man  runneth  not  to  the  contrary,  they  are  most  certainly 
distributed  to-day,  with  as  near  an  approach  to  accuracy 
as  any  other  indirect  taxes  whatever.  If  taxes  upon 
consumption  are  to  be  got  rid  of,  taxes  upon  all  kinds  of 
improvements  of  land,  which  can  be  ascertained  and  sep- 
arately valued,  must  be  abolished. 

§  3.  Taxation  of  improvements  injurious  to  the  pub- 
lic interest.  The  taxation  of  improvements  upon  land 
is  in  many  ways  attended  with  injury  to  the  public  good. 
No  attempt  will  be  made  here  to  deal  with  this  subject 
exhaustively.  Only  a  few  obvious  results  will  be  men- 
tioned. 

It  has  already  been  pointed  out  that  the  tendency  of 
all  taxation  upon  things  of 'human  production  is  to  dimin- 


IIO  NATURAL    TAXATION. 

ish  the  quantity  and  degrade  the  quality  of  such  things. 
This  principle  applies  to  land  improvements  as  much  as 
to  movable  chattels  ;  and  if  movables  should  be  relieved 
from  taxation,  while  fixtures  remain  subject  to  it,  the 
weight  of  taxation  upon  them  would  of  course  be  greatly 
increased  ;  and  their  production  would  be  more  than  ever 
discouraged. 

Beautiful  buildings  are  a  source  of  constant  instruction 
and  delight.  Those  who  design  and  erect  such  buildings, 
in  places  where  they  can  be  easily  seen  by  multitudes  of 
people,  are  public  benefactors.  But  beauty  in  a  build- 
ing attracts  the  attention  of  the  assessor,  and  leads  to  an 
increase  of  valuation  far  in  excess  of  its  actual  cost.  It 
is  no  answer  to  say  that  the  assessor  will  reduce  the  as- 
sessment, upon  evidence  that  he  has  overvalued  the  build- 
ing. He  will  not  have  overvalued  anything.  He  will 
simply  have  undervalued  the  ugly  buildings  more  than  the 
handsome  ones.  The  effect  will  be  to  increase  the  bur- 
den upon  handsome  buildings,  precisely  as  much  as  if  they 
were  overvalued,  yet  without  the  possibility  of  a  remedy. 
Thus  the  taxation  of  buildings  is  a  constant  and  severe 
discouragement  to  the  development  of  architectural  taste 
and  beauty. 

§  4.  Proof  from  experience.  The  mere  substitution 
of  good  glass  for  bad,  in  the  front  windows  of  a  house, 
usually  leads  to  an  increase  of  the  assessment,  to  an 
amount  twice  or  thrice  the  cost  of  the  improvement, 
Cases  could  be  given  in  which  the  expenditure  of  $200 
in  making  the  front  of  a  house  neat  and  agreeable  has 
been  promptly  followed  by  an  increase  of  $2000  in  the  as- 
sessment, thus  imposing  a  permanent  fine  of  25  per  cent, 
per  annum  on  the  cost  of  the  improvement.  It  is  dan- 
gerous even  to  mend  a  broken  gate  or  repair  a  rotten  front 
walk.  Shrewd  house-owners  confine  most  of  their  im- 


TAX  A  TZOAT  OF  IMPRO  CEMENTS.  1 1 1 

provements  to  the  interior  or  the  rear  of  their  houses, 
so  that  the  assessor  shall  not  see  them,  on  his  annual 
rounds.  There  are  many  houses  in  large  cities,  having  no 
external  signs  of  difference,  which  differ  in  cost  by  from 
$50,000  to  $200,000,  by  reason  of  interior  improvements, 
which  the  assessor  knows  nothing  about.  Yet  if  $10,000 
had  been  spent  upon  the  front  of  one  of  these  houses  its 
assessment  would  have  been  increased  at  least  $20,000. 
The  more  honest  and  faithful  the  assessor  may  be,  the 
worse  will  be  his  work  in  such  cases. 

Nor  is  it  merely  in  matters  of  taste  and  beauty  that  the 
system  works  evil.  Houses  are  cramped  and  badly  built, 
in  order  to  avoid  taxation.  In  the  city  of  Brooklyn,  thou- 
sands of  houses  have  three  full  stories  in  the  rear,  but 
only  two  and  a  half  in  front,  for  no  other  reason  than 
that,  by  the  custom  of  assessors,  such  houses  are  charged 
as  only  two-storied  houses,  thus  reducing  taxation  upon 
them  20  or  30  per  cent,  below  three-storied  houses  on  the 
same  block.  Old,  decayed,  and  unhealthy  houses  are 
patched  up  for  years,  simply  because  if  they  were  com- 
pletely rebuilt  the  tax  upon  them  would  be  increased  to 
such  an  extent  as  to  destroy  all  the  profit.  We  reproduce, 
at  the  verge  of  the  twentieth  century,  the  absurd  oppres- 
sions of  the  thirteenth,  when  every  rich  Jew  kept  the  front 
of  his  house  filthy  and  broken  down,  so  as  to  deceive  his 
Gentile  plunderers,  while  indulging  in  magnificence  in  the 
secrecy  of  his  inner  rooms. 

The  same  thing  is  true  in  rural  districts.  A  farmer 
who  ventures  to  beautify  the  outside  of  his  house,  to  build 
a  model  barn  or  stable,  to  make  his  fence  an  ornament, 
instead  of  a  nuisance,  or  even  to  make  his  lawn  and  gar- 
den beautiful  or  his  farm  neat,  must  expect  to  pay  a  large 
fine  for  his  rash  act.  He  is  treated  worse  than  a  criminal ; 
for  if  he  had  committed  a  crime  he  would  be  fined  only 


112  NATURAL    TAXATION. 

once  in  his  life  for  one  act ;  but  if  he  has  dared  to  beautify 
his  house  and  farm  he  must  pay  a  new  fine  for  every 
year  of  his  life ;  and  his  heirs  must  go  on  paying  it  for- 
ever. The  virtues  of  the  father  are  visited  in  penalties 
upon  the  children  to  the  third  and  fourth  generation.1 

§  5.  Just  and  equal  assessments  impracticable.  Jus- 
tice and  equality  in  the  assessment  of  buildings  and  other 
improvements  of  land  are  nearly  as  impracticable  as  in 
the  case  of  ordinary  visible  chattels.  The  most  honest 
assessors  cannot  appraise  them  with  even  a  reasonable 
approximation  to  equality.  This  can  be  proved  both 
by  theory  and  by  experience. 

The  value  of  a  dwelling-house,  for  example,  cannot  be 
fairly  decided  by  any  outside  inspection.  In  cities  noth- 
ing is  more  common  than  to  find  houses  almost  precisely 
alike  in  outside  appearance,  which  differ  greatly  in  com- 
fort, luxury,  and  market  price.  One  is  well  built  ;  the 
other  is  not.  One  is  warm  in  winter,  and  cool  in  summer  ; 
the  next  house  is  the  reverse.  One  has  well  arranged 
rooms ;  the  other  has  not.  One  is  simple  externally,  but 
has  an  interior  air  of  comfort,  which  makes  it  always  sal- 
able ;  its  next  neighbor  has  precisely  the  same  outside, 
but  is  so  unhomelike,  that  it  gives  one  a  chill  to  cross  its 
threshold.  One  has  a  plain  and  unattractive  interior: 
the  next  house  is  permanently  decorated  with  magnifi- 
cence and  taste.  One  is  decorated  with  a  sham  magnifi- 

1  Mr.  Wells's  famous  Report  on  Local  Taxation  (1871)  contains  some  ad- 
mirable illustrations  on  this  point.  He  mentions  instances  in  which  every 
improvement  made  upon  a  railroad  was  made  an  excuse  for  a  great  increase 
in  its  taxes,  to  the  plain  discouragement  of  such  improvements  and  to  the 
peril  of  human  life.  He  tells  how,  after  the  building  of  one  handsome  rail- 
way station,  on  the  New  York  Central  Railroad,  had  been  punished  by  a 
heavy  tax,  Mr.  Vanderbilt  refused  to  build  any  more  new  depots.  The 
hideous  structures  which  still  remain  at  Buffalo  and  other  important  stations, 
are  a  continuing  testimony  to  the  folly  of  taxing  new  buildings. 


TAX  A  TION  OF  IMPRO  VEMENTS.  I  I  3 

cence,  which  would  cause  any  assessor,  if  admitted  to 
inspect  it,  to  put  a  high  value  upon  it.  Another  is 
adorned  with  such  perfect  simplicity  and  harmonious 
beauty  as  to  cost  and  be  salable  for  twice  as  much  ;  yet 
no  assessor  would  ever  guess  it. 

These  are  not  imaginary  cases  ;  they  are  illustrations 
taken  from  a  multitude  which  have  come  under  the 
writer's  own  observation.  Houses  could  easily  be  pointed 
out,  in  large  cities,  which  are  assessed  at  about  the  same 
value,  and  which  present  substantially  the  same  external 
appearance,  but  which  differ  in  cost  by  $50,000,  $100,000, 
and  even  $250,000.  Probably  this  entire  difference  would 
not  be  realized  upon  a  sale  ;  but  a  large  part  of  it  cer- 
tainly would  be. 

§  6.  The  wealthy  relieved  :  the  poor  burdened.  It 
follows  that  the  dwellings  of  the  very  rich  will  inevitably 
be  assessed,  by  an  honest  and  unprejudiced  assessor,  at 
much  less,  in  proportion  to  their  real  value,  than  the  dwel- 
lings of  those  in  moderate  circumstances.  As  a  matter  of 
course  a  dishonest  assessor  will  value  rich  men's  houses  at 
still  lower  rates  ;  because  it  is  from  rich  men  that  bribes  can 
be  most  easily  obtained.  In  any  event,  the  most  valuable 
houses  in  cities  are  sure  to  escape  their  full  share  of  taxation. 

This,  again,  is  no  mere  theory.  It  is  a  notorious  fact. 
A  recent  investigation,  conducted  by  a  fearless  and  impar- 
tial journal  in  Chicago,  has  demonstrated  this  fact,  so  far 
as  that  city  is  concerned,  in  great  detail  and  with  conclu- 
sive proof.  This  inequality  of  assessment  is  carried  to 
such  an  enormous  extent  in  Chicago  as  to  leave  no  room 
for  doubt  that  it  is  largely  due  to  actual  bribery.  But  it 
is  found  (in  a  much  less  degree)  in  cities  where  not  the 
slightest  suspicion  attaches  to  assessors. 

Precisely  the  same  thing  is  true  with  respect  to  office 
buildings,  mills,  factories,  and  all  other  buildings  used  for 


114  NATURAL    TAXATION. 

business  purposes  in  large  cities.  It  has  been  matter  of 
common  rumor  and  universal  belief  in  one  such  city,  that 
the  office  of  assessor,  in  one  small  ward,  full  of  great 
office  buildings,  was  worth  $75,000  a  year  to  its  occupant. 

§  7.  Farmers  unequally  burdened.  What  buildings 
are  likely  to  be  assessed  with  reasonable  equality,  as  com- 
pared with  each  other  ?  Can  there  be  any  doubt  that  they 
are  farm  buildings  and  village  dwellings?  Among  these, 
substantial  uniformity  of  style  and  cost  prevails.  The 
difference  will  be,  for  the  most  part,  a  matter  of  a  few 
hundred  dollars.  Interior  decorations  are  unknown.  But, 
whatever  variations  there  may  be,  all  are  familiarly  known 
to  the  whole  neighborhood.  The  village  assessor  usually 
knows  all  about  them  ;  and,  if  he  does  not,  he  has  only  to 
ask  a  few  questions  at  the  village  store. 

The  consequence  is  that  with  respect  to  improvements 
upon  land  just  as  much  as  with  respect  to  personal  prop- 
erty, farmers  and  villagers  are  sure  to  be  taxed  more  fully 
and  accurately  than  the  residents  of  cities;  while  the  rich- 
est city  residents  will  pay  the  smallest  share  of  the  tax, 
in  proportion  to  the  value  of  their  property. 

The  full  effect  of  the  taxation  of  improvements  upon 
farmers  and  other  residents  of  rural  districts  must,  how- 
ever, be  reserved  for  a  later  chapter,  dealing  with  affirma- 
tive propositions.  Up  to  this  point,  our  work  is  purely 
negative.  The  example  of  Nature  herself  has  been  fol- 
lowed. We  have  been  engaged  in  finding  out  what  is  bad, 
not  in  determining  what  is  good.  That  is  next  to  be 
undertaken. 


CHAPTER    IX. 
THE  NATURAL  TAX. 

§  I.  Automatic  taxation.  Having  seen  that  every 
form  of  indirect  taxation  is  unjust  to  the  poor,  and  that 
every  form  of  so-called  direct  taxation  thus  far  examined 
is  unjust  to  the  honest,  we  cannot  be  surprised  at  the 
unanimity  with  which  it  has  hitherto  been  declared  that 
there  is  no  scientific  or  natural  method  of  taxation. 

Nevertheless,  if  we  can  find  in  actual  operation,  in  every 
civilized  country,  a  species  of  taxation  which  automati- 
cally collects  from  every  citizen  an  amount  almost  exactly 
proportioned  to  the  fair  and  full  market  value  of  the  bene- 
fits which  he  derives  from  the  government  under  which  he 
lives  and  the  society  which  surrounds  him,  may  we  not 
safely  infer  that  this  is  natural  taxation  ?  And  is  not  such 
taxation  capable  of  being  reduced  to  a  science? 

Such  an  automatic,  irresistible,  and  universal  system  does 
exist.  All  over  the  world  men  pay  to  a  superior  author- 
ity a  tribute,  proportioned  with  wonderful  exactness  to 
these  social  advantages.  Each  man  is  compelled  to  do 
this,  by  the  fact  that  other  men  surround  him,  eager  to 
pay  tribute  in  his  place  if  he  will  not.  The  just  amount 
of  this  tribute  is  determined  by  the  competition  of  all  his 
neighbors ;  who  calculate  to  a  dollar  just  how  much  the 
privilege  is  worth  to  them,  and  who  will  gladly  take  his 
place  and  pay  in  his  stead.  Every  man  must,  therefore, 


Il6  NATURAL    TAXATION. 

pay  as  much  as  some  other  man  will  give  for  his  place  ;  and 
no  man  can  be  made  to  pay  any  more. 

§  2.  Ground  rent.  This  tribute  is  sometimes  paid  to 
the  state,  when  it  is  called  a  tax ;  but  it  is  far  more  often 
paid  to  private  individuals,  when  it  is  called  ground  rent. 

Where  there  is  no  government  there  is  no  ground  rent. 
As  government  grows  more  complex  and  does  more  for 
society,  ground  rents  increase.  Any  advantage  possessed 
by  one  piece  of  land  over  another  will,  it  is  true,  give  rise 
to  rent ;  but  that  rent  cannot  be  collected  without  the 
aid  of  government ;  and  no  advantage  in  fertility  is  ever 
equal  in  value  to  the  advantage  of  society  and  govern- 
ment. An  acre  of  sand  on  the  coast  of  New  Jersey,  at 
Atlantic  City,  Cape  May,  or  Long  Branch,  is  worth  more 
rent  than  a  million  acres  of  fertile  land  five  hundred  miles 
distant  from  all  human  society.  The  sixteenth  of  an  acre 
of  bare  rock  in  New  York  City  is  worth  more  than  a 
thousand  acres  of  the  best  farming  land  in  Manitoba. 

Ground  rent,  therefore,  is  the  tribute  which  natural  laws 
levy  upon  every  occupant  of  land,  as  the  market  price  of 
all  the  social  as  well  as  natural  advantages  appertaining  to 
that  land,  including,  necessarily,  his  just  share  of  the  cost 
of  government.1 

1  The  definition  of  rent  here  given  is  not  inconsistent  with  the  principles 
of  Ricardo  ;  although  it  is  not  expressed  in  his  words.  As  Senior  and  other 
friends  of  Ricardo  have  remarked,  he  never  took  pains  to  express  himself 
accurately  ;  and  he  constantly  assumed  that  his  readers  would  remember 
every  limitation  which  he  had  once  laid  down  and  would  comprehend  all 
that  was  implied  in  his  mind.  His  definition  of  the  law  of  Rent  is  a  remark- 
able illustration  of  his  peculiar  methods. 

No  man  could  have  been  more  fully  aware  than  was  Ricardo.  of  the  enor- 
mous amount  of  rent  which  was  collected  in  his  own  time  from  land  which 
had  no  fertility  and  no  productive  power.  Most  of  his  life  was  spent  upon 
just  such  land  in  London  ;  and  for  the  use  of  such  land  he  paid  and  re- 
ceived great  rents.  Yet  his  famous  definition  assumes  that  rent  is  never  paid 
for  anything  except  "  the  use  of  the  original  and  indestructible  powers  of 


THE   NATURAL  TAX.  1 1/ 

§  3.  The  justice  of  ground  rent.  Now  observe  how 
perfectly  this  natural  tribute  meets  all  the  requirements 
of  abstract  justice,  with  which  our  professor-friends  have 
so  long  wrestled  in  vain.  Here  is  the  exact  quid  pro 
quo.\  No  sane  man,  in  any  ordinary  society,  pays  too 
much  rent.  For  he  pays  no  more  than  some  other  man 
is  willing  to  pay  for  the  same  privileges.  He  therefore 
pays  no  more  than  the  market  value  of  the  advantage 
which  he  gains  over  other  men  by  occupying  that  precise 
position  on  the  earth.  He  gains  a  certain  profit  out  of 
that  position,  which  he  could  not  gain  elsewhere.  That 

the  soil."  And  his  exposition  of  ,the  operation  of  this  Jaw  is  confined  so 
strictly  to  the  growth  of  "  corn  "  (that  is,  wheat)  that  some  of  his  disciples 
and  many  of  his  critics  seriously  assume  that  Ricardo  did  not  suspect  the 
existence  of  any  law  of  rent,  which  was  not  governed  entirely  by  the  growth 
of  "  corn." 

But  Ricardo's  methods,  in  this  and  in  other  instances,  recall  the  style  of 
the  Ten  Commandments.  Taken  literally,  those  commandments  are  as  de- 
fective a  code  of  morals  as  can  be  found  in  almost  any  ethical  system.  They 
do  not  in  terms  forbid  the  most  brutal  violence  or  recklessness,  if  death 
does  not  result,  nor  any  form  of  fraud  or  swindling  not  amounting  to  literal 
theft.  They  do  not  forbid  any  form  of  outrage  upon  unmarried  women. 
They  do  not  forbid  lying,  except  in  judicial  proceedings.  They  have  not 
a  word  about  malice,  envy,  hatred,  bribery,  betrayal  of  trust,  or  even  treason. 
And  yet  both  the  Hebrew  nation  and  the  Christian  church  have  always  seen 
these  prohibitions  implied  in  the  curt  words  which  denounce  merely  a  few 
of  the  worst  and  most  striking  forms  of  crime. 

So  it  is  with  Ricardo.  He  took  the  most  striking  and  easily  understood 
illustration  of  a  principle,  as  his  method  of  stating  the  principle  itself.  His 
writings  always  bear  the  marks  of  a  genius,  which  was  driven  by  its  own  in- 
ternal energy  to  find  relief  in  utterance,  but  which  cared  very  little  whether 
its  utterances  were  understood  or  not.  In  this  particular  instance,  he  sug- 
gested a  principle  by  a  single  illustration  of  the  most  familiar  character. 
But  the  principle  is  not  limited  by  the  illustration.  Any  advantage  which 
one  piece  of  land  has  over  another,  for  the  use  of  man,  was  included,  in  Ri- 
cardo's mind,  among  the  "  original  and  indestructible  powers  of  the  soil." 
And  foremost  among  these  advantages  stands  that  of  affording  standing 
ground,  in  the.  midst  of  a  highly  civilized  society,  under  the  protection  of  a 
highly  organized  and  faithful  government. 


Il8  NATURAL    TAXATION. 

fact  is  conclusive  proof  that  this  profit  is  not  the  fruit  of 
his  labor,  but  comes  out  of  some  superior  fertility  in  the 
soil,  some  superior  opportunity  for  selling  the  fruits  of 
his  labor,  some  superior  protection  from  government  in 
the  enjoyment  of  those  fruits,  or  some  other  advantage 
of  mere  position.  Thus  he  receives  full  value,  in  exchange 
for  his  payment.  He  receives  it ;  not  merely  society  in 
general.  He  receives  the  whole  of  it :  he  is  not  compelled 
to  divide  a  dollar's  worth  of  this  benefit  with  his  neigh- 
bors. But,  on  the  other  hand,  he  pays  the  full  value  of 
what  he  thus  receives ;  and  he  owes  nothing  more  to  any- 
body. The  transaction  is  closed,  upon  fair  and  equal 
terms. 

Here,  then,  is  a  tax,  just,  equal,  full,  fair,  paid  for  full 
value  received,  returning  full  value  for  the  payment,  meet- 
ing all  the  requirements  of  that  ideal  tax,  which  pro- 
fessors and  practical  men  alike  have  declared  to  be  an 
impossibility.  It  is  not  merely  a  tax  which  justice  al- 
lows ;  it  is  one  which  justice  demands.  It  is  not  merely 
one  which  ought  to  be  collected  :  it  is  one  which  in- 
fallibly will  be  and  is  collected.  It  is  not  merely  one 
which  the  state  ought  to  see  collected  ;  it  is  one  which, 
in  the  long  run,  the  state  cannot  prevent  from  being 
collected.  The  state  can  change  the  particular  landlord  : 
it  cannot  abolish  rent. 

§  4.  Landlords  natural  tax-gatherers.  It  is  quite 
true  that  some  men  do  not  pay  ground  rent  to  any  one 
else.  But  these  are  landlords,  of  the  most  highly  de- 
veloped type.  A  few  of  these  men  seem,  at  first  glance, 
neither  to  pay  nor  receive  ground  rent.  But  this  is  an 
illusion.  They  do  receive  such  rent,  in  the  value  which 
remains  in  their  possession,  in  excess  of  what  they  would 
hold  if  they  paid  rent  like  other  people.  Moreover,  such 
men  almost  invariably  have  either  paid  a  price  for  the 


THE  NATURAL  TAX.  119 

land  on  which  they  live  (which  is  capitalized  rent  paid  by 
them),  or  they  hold  land  which  cost  them  less  than  they 
could  sell  it  for  (which  is  capitalized  rent  gained  by  them), 
or  they  have  done  both. 

Those  who  actually  receive  ground  rent,  or  who  could 
receive  it  if  they  would,  form  the  class  which  we  call 
"landlords."  They  are  the  tax-gatherers  appointed  by  Na- 
ture. Year  by  year  they  assess  the  value  of  the  privilege  of 
occupying  their  land.  They  can  do  this,  with  an  accuracy 
to  which  no  government  assessor  can  ever  attain ;  because 
they  receive,  at  least  once  a  year,  the  best  possible  infor- 
mation as  to  this  value,  in  the  form  of  bids  from  tenants. 
They  have  only  to  announce  their  willingness  to  receive 
bids ;  and  the  bids  come  in.  Nobody  runs  after  the  assess- 
or, to  tell  him  what  property  is  worth.  Everybody  runs 
after  the  landlord,  to  tell  him  what  his  land  is  worth. 
Not  that  everybody  tells  him  the  truth  ;  but  he  soon  finds 
out  what  is  the  truth,  by  comparing  conflicting  state- 
ments. 

The  landlord,  we  repeat,  is  Nature's  elected  tax-gath- 
erer. But  Nature  does  not  compel  him,  any  more  than  any 
other  collector  of  taxes,  to  pay  over  to  the  state  what  he 
collects.  This  must  be  done  by  the  state  itself. 

§5.  Taxation  of  ground  rents.  Nature,  having  thus 
provided  a  method  by  which  all  men  pay,  of  necessity,  a 
tribute  sufficient  to  defray  all  expenses  of  government, 
clearly  points  to  the  collection  of  such  expenses  from  this 
tribute.  We  have  already  seen  that  Nature  and  Science 
condemn  every  other  method  of  raising  public  revenue, 
by  making  equality  and  justice  impossible  under  any 
such  method.  Do  they  not,  with  equal  clearness  and 
precision,  point  to  the  taxation  of  ground  rents,  as  not 
merely  a  just  method  of  raising  revenue,  but  also  as  the 
only  just  one?  Scientifically  speaking,  a  tax  upon  ground 


120  NATURAL    TAXATION. 

rents  is  not  a  tax  at  all :  it  is  merely  the  collection,  by  the 
state,  of  a  tax  already  levied  by  an  automatic  process.  If 
we  call  it  a  tax,  it  is  a  tax  upon  the  proceeds  of  taxation, 
and  nothing  else.  \  Until  this  source  of  revenue  is  ex- 
hausted.  every  ofner  tax  is  double  taxation.  So  long 
as  this  fund  remains,  every  other  tax  is  of  necessity 
unjust,  as  truly  as  it  would  be  unjust  to  squander  the 
proceeds  of  any  tax  among  a.  few  favored  officials  and 
then  levy  the  whole  of  the  same  tax  over  again  upon  the 
people.  Seldom  has  there  been  a  more  beautiful  illus- 
tration of  the  wise  yet  relentless  working  of  natural  la\v, 
than  in  the  proved  impossibility  of  justly  collecting  any 
tax  other  than  upon  ground  rent.  It  shows  that  Nature 
makes  it  impossible  to  execute  justly  a  statute  which  is  in 
its  nature  unjust.  The  propriety  of  an  exclusive  tax 
upon  ground  rents  is  established,  not  merely  by  affirmative 
proof  of  its  justice,  but  by  the  demonstration  of  universal 
experience  that  no  other  form  of  taxation  can  be  made 
effective,  adequate,  just,  and  equal. 

|  6.  No  objectionable  methods  of  collection.  The 
absolute  soundness  of  the  theory  upon  which  the  tax  on 
ground  rents  is  based  is  further  established^]^  the  fact 
that  its  efficient  collection  requires.no  objectionable  meth- 
ods^ Such  a  tax  already  exists  in  the  United  States  ;  al- 
though it  is  covered  up  by  a  multitude  of  other  taxes. 
We  all  know,  by  experience,  that  such  a  tax  is  entirely 
free  from  the  oppressive  and  corrupting  incidents  of  other 
taxes.  It  calls  for  no  personal  returns,  no  taxpayers' 
oaths,  no  exposure  of  private  affairs.  The  collector  of 
such  a  tax  would  not  have  the  slightest  excuse  for  inquisi- 
torial proceedings,  for  the  examination  of  private  books, 
for  entry  into  houses,  for  personal  searches,  or  for  asking  a 
single  question  of  the  taxpayer.  In  fact,  he  would  not 
pay  the  smallest  attention,  to. any  statement  which  a  tax- 


THE  NATURAL   TAX.  121 

payer  might  make.  Women  and  children  would  be  taxed 
no  more  heavily  than  men.  Trust  estates  would  pay  no 
more  than  others.  There  would  be  no  exemptions,  no 
favoritism,  and  no  preference  given,  either  to  the  rich  or  to 
the  poor.  Mistakes  of  course  would  occur  ;  and  the  brib- 
ery of  assessors  would  be  possible.  But  those  are  an  ex- 
tremely small  part  of  the  evils  of  all  existing  methods  of 
taxation  ;  and  some  of  the  most  monstrous  inequalities 
are  found  where  the  assessors  are  absolutely  incorruptible 
and  thoroughly  competent.  All  of  these  would  disappear. 

§  7.  Assessment  of  ground  rent  practicable.  It  is 
asserted  by  a  few  persons,  who  have  given  no  careful  con- 
sideration to  the  subject,  that  it  is  as  difficult  to  assess 
accurately  the  value  of  the  bare  land,  as  it  is  to  assess  any 
other  property.  This  objection  will  not  bear  the  least 
examination. 

Of  course  absolute  accuracy  is  not  to  be  expected  in 
anything.  It  has  not  pleased  God  to  make  this  world 
literally  perfect,  in  any  respect  ;  and  man  cannot  hope  to 
be  wiser  than  his  Maker.  But  a  close  approach  to  accuracy 
is  possible  in  taxing  ground  rents ;  and  it  is  not  possible 
in  any  other  tax. 

Where  land  is  rented  separately  from  its  improvements, 
the  tax  can  be  collected  with  almost  ideal  accuracy.  The 
tenant  can  be  required  to  pay  it,  being  allowed  to  deduct 
it  from  his  rent.  He  will  have  no  motive  for  understating 
the  rent ;  and  if  he  overstates  it,  the  loss  will  be  his  own. 
Nothing  but  positive  fraud  on  the  part  of  the  official  as- 
sessor can  produce  inequality  in  this  tax ;  and  such  fraud 
would  be  too  dangerous  to  be  common. 

Where  land  and  improvements  are  rented  together,  the 
value  of  the  land  alone  is  always  approximately  ascertain- 
able.  Real  estate  dealers  in  the  district  would  have  little 
difficulty  in  estimating  the  price  at  which  any  tract  of  land 


122  NATURAL    TAXATION. 

could  readily  be  sold  ;  and  this  would  be  the  proper  basis 
for  assessment. 

Where  land  is  owned  by  the  actual  occupier,  dealers  can 
still  easily  estimate  its  market  value.  Titles  to  town  lots 
are  continually  changing  ;  thus  fixing  a  standard  of  prices : 
while  in  rural  districts  there  is  much  less  variation  in  prices ; 
and  all  the  neighbors  know  the  relative  value  of  each  farm. 
Whatever  inequalities  might  remain,  it  is  certain  that  they 
would  be  vastly  less  than  those  which  are  now  common. 

§  8.  Assessment  of  farm  lands.  It  has  been  asked  : 
How  can  the  unimproved  value  of  farm  lands  be  ascer- 
tained, after  they  have  been  cleared,  ploughed,  drained, 
and  fertilized  for  many  years  ?  The  answer  is  simple. 
The  whole  of  a  farm  is  to  be  assessed  at  the  same  value, 
per  acre,  which  attaches  to  the  unimproved  land,  remain- 
ing on  the  farm  and  having  substantially  the  same  natural 
advantages  or  disadvantages.  It  is  next  asked  :  How 
shall  such  an  estimate  be  made,  if  the  whole  farm  has  been 
fully  cultivated  ?  There  is  no  such  farm,  except  a  few 
very  small  ones,  selected  from  larger  farms  ;  and  in  those 
cases  the  valuation  can  be  made  upon  the  basis  of  unim- 
proved land  on  adjoining  farms.  It  has  been  pretended 
that  there  are  cases,  in  which  there  is  no  unimproved  land 
near  by.  But  this  is  almost  absurd.  Yet  if  such  a  mar- 
vellous farm  could  be  found,  it  is  certain  to  be  close  to  a 
highway.  The  price  which  could  be  obtained  for  the  land 
covered  by  the  highway,  if  closed  and  sold,  would  afford 
a  perfect  test  of  the  value  of  all  adjoining  land. 

But  the  best  reply  to  all  such  objections  is  to  be  found 
in  the  practical  experience  of  California,  where. this  very 
method  of  assessment  is  carried  out  in  agricultural  dis- 
tricts, without  difficulty,  having  been  required  by  law, 
ever  since  1879,  an<^  by  the  experience  of  Massachusetts, 
where  the  value  of  farm  lands  has  been  ascertained  by  the 


THE  NATURAL  TAX.  12$ 

decennial  census,  for  many  years,  carefully  separating  the 
value  of  improved  lands  from  unimproved  and  unimprov- 
able lands. 

§9.  Judicial  correction  of  assessments.  Under  the 
present  systems  of  taxation,  it  has  been  found  necessary 
to  allow  appeals  to  the  courts  from  some  unjust  assess- 
ments :  while  State  boards  of  equalization  in  New  York, 
Illinois,  California,  and  other  States  put  county  valuations 
up  or  down,  in  order  to  remedy  the  evils  caused  by  local 
carelessness  or  evasion.  These  remedies  should  be  ex- 
tended and  placed  upon  a  foundation  of  complete  justice. 
The  courts  should  be  given  full  power  to  make  local  assess- 
ments uniform,  reducing  every  assessment  to  the  basis  of 
the  lowest  in  the  county.  The  county  would  lose  no 
revenue  ;  for  the  tax  rate  would  be  increased  to  corre- 
spond with  the  general  reduction.  But  citizens  would  be 
relieved  from  the  gross  injustice  which  many  now  suffer. 
At  present,  in  New  York,  if  not  everywhere,  a  taxpayer 
can  obtain  no  relief,  unless  his  own  property  is  overvalued. 
But  an  undervaluation  of  his  neighbors  is  just  as  effectual 
an  increase  of  his  share  of  the  general  burdea  as  would  be 
an  overvaluation  of  his  own  property.  It  would  cast  an 
offensive  responsibility  upon  him,  to  give  him  relief  only 
through  a  judgment  increasing  his  neighbors  assessments  ; 
and  such  a  course  would  produce  no  better  result  for  the 
county  than  would  a  general  reduction  to  one  common 
basis.  The  State  at  large  would  take  care  of  its  interest 
in  the  matter,  through  the  board  of  equalization. 

§  10.  Correction  by  sales.  If  all  other  remedies 
failed,  one  would  remain,  which  is  far  too  dangerous  for 
use  under  existing  methods,  but  which  would  be  quite 
safe  under  the  new  system.  The  owner  of  any  real  estate 
which  was  assessed  for  more  than  the  real  value  of  the 
bare  land,  could  refuse  to  pay  the  tax.  Then  his 


124  NATURAL    TAXATION. 

land  would  be  offered  for  sale  to  the  highest  bidder, 
subject  to  the  obligation  of  paying  to  the  owner  the 
appraised  value  of  all  improvements  thereon,  upon  the 
principles  already  stated.  The  value  could  never  be  more 
than  the  cost  of  replacing  the  improvements,  and  it  would 
often  be  much  less  ;  because  costly  buildings  are  frequently 
erected  in  situations  where  they  are  or  become  useless,  and 
therefore  of  no  value.  To  the  full  extent  of  their  actual 
market  value,  however,  the  purchaser  at  a  tax  sale  would 
be  required  to  indemnify  the  owner.  Such  a  sale  would 
determine  the  precise  value  of  the  land,  for  the  purposes 
of  taxation. 

Nor  would  such  sales,  however  frequent  they  might  be, 
work  any  hardship  to  the  landowner.  He  would  have  a 
right  to  bid  ;  and  he  would  have  great  advantages  over 
any  other  bidder.  All  the  money  paid  in  excess  of  the 
tax  and  the  penalty  would  go  directly  into  his  pocket ; 
and,  therefore,  he  would  be  the  only  bidder  not  required 
to  pay  more  than  that  sum.  If  the  tax  were  really  exces- 
sive no  one  would  bid  up  to  it ;  because  the  purchaser 
would  be  compelled  to  pay  annually  thereafter  as  large  a 
tax  as  he  was  willing  to  bid  at  the  sale.  The  tax  sale,  in 
short,  would  fix  the  valuation  upon  which  future  assess- 
ments would  be  made.  Thus  the  ground  rent  (which, 
capitalized,  constitutes  the  only  value  of  any  land)  would 
be  fully  taxed  ;  while  the  land-owner  would  have  absolute 
security  for  the  possession  of  the  value  of  all  his  improve- 
ments, free  of  tax.  But  no  such  experiment  would  ever 
become  really  necessary. 

§11.  Taxation  of  franchises  and  monopolies.  It  has 
been  already  mentioned  that  the  professed  defenders  of 
farmers  and  other  owners  of  small  homesteads  oppose  the 
concentration  of  taxation  upon  ground  rents,  on  the  plea 
that  this  would  exempt  all  franchises  and  monopolies, 


THE  NATURAL  TAX.  125 

including  railways,  express  companies,  telegraphs,  tel- 
ephones, gasworks,  electric  lighting  works,  oil-pipe  lines, 
and  the  like.  If  this  were  the  fact  we  may  be  sure  that 
the  shrewd  managers  of  such  monopolies,  assisted  as  they 
are  by  the  most  sagacious  and  experienced  advisers  in  the 
country,  would  have  discovered  it  by  this  time.  We  may 
also  be  sure  that  the  legislatures  of  two  thirds  of  the 
States,  owned  as  they  are,  body  and  soul,  by  corporations 
of  this  precise  class,  would  hasten  to  avow  their  con- 
version to  the  principle  of  taxing  ground  rents  and  to 
embody  it  in  their  statutes.  The  Senate  of  the  United 
States  would  before  now  have  passed  any  necessary 
amendment  to  the  Constitution,  by  a  two-third  vote. 

But  do  we  see  the  slightest  tendency  in  this  direction? 
Is  the  proposal  received  with  favor  by  the  managers  of  a 
single  great  railway  or  telegraph  or  of  any  great  monop- 
oly ?  On  the  contrary,  is  it  not  notorious  that  they  are 
unanimously  and  bitterly  opposed  to  it? 

These  gentlemen  are  not  deceived.  They  know  well 
enough  that  their  valuable  franchises  represent  exclusive 
rights  to  the  use  of  land,  and  that  they  neither  have  nor 
can  have  any  exclusive  rights  to  anything  else,  except  to 
patent  rights,  which  are  very  costly,  and  which  last  only 
for  a  few  years. 

§  12.  Railway  franchises.  Take  one  of  our  great  rail- 
way lines,  for  example.  Add  up  either  the  market  value 
or  the  cost  of  replacing  its  rails,  equipment,  building 
improvements  and  chattels  of  every  kind,  whether  mova- 
ble or  immovable,  and  at  a  most  liberal  valuation.  The 
total  will  not  come  within  millions  of  its  nominal  debt, 
and  will  never  touch  its  capital  stock.  What  gives  value 
to  the  enormous  amount  of  stock  ?  The  exclusive  privi- 
lege of  using  a  narrow  strip  of  barren  land,  five  hundred, 
a  thousand,  or  two  thousand  miles  long,  unbroken  by 


126  NATURAL    TAXATION. 

highways  or  any  other  rights  over  land,  whether  public 
or  private.  Under  the  present  system  railway  managers 
persuade  local  assessors  that  this  land  should  be  valued 
no  higher  than  equally  barren  land  in  adjoining  farms  ; 
and  the  farmers'  especial  advocates  insist  that  this  is  the 
true  basis  of  valuation.  But  it  is  absurd. 

The  value  of  all  land  depends  upon  the  value  of  the 
use  which  can  be  made  of  it.  No  farmer  can  use  his  land 
for  the  carriage  of  goods  or  passengers,  beyond  the  limits 
of  his  own  farm.  If  all  the  farmers  between  New  York 
and  San  Francisco  agreed  to  build  a  railway,  without 
forming  a  railway  corporation,  they  would  be  compelled 
to  break  their  line  at  every  highway,  to  dismount  their 
passengers  and  to  unload  their  freight.  Therefore,  no- 
body outside  of  a  railway  company  can  use  his  land  for 
this  most  valuable  purpose.  And  this  privilege  of  using 
an  unbroken  strip  of  land,  with  locomotives  running 
forty  miles  an  hour,  is  all  which  gives  to  the  stock  of  any 
American  railway  company  its  market  value ;  while  it 
generally  covers  from  one  third  to  one  half  of  its  bonds, 
in  addition. 

The  notion  that  such  privileges  on  land  are  to  be 
appraised  by  the  acre,  like  farm  lands,  can  be  readily 
tested  by  applying  the  same  principle  to  any  other  land. 
In  great  cities  land  is  often  sold  at  a  price  estimated  by 
the  square  foot.  Some  lots,  containing  2000  square  feet, 
are  salable  for  $2,000,000,  or  $100  per  foot.  But  if  a 
single  foot  of  this  land  were  sold  by  itself,  with  the  knowl- 
edge that  no  more  could  be  had,  who  would  give  even 
one  dollar  for  it,  except  as  a  means  of  blackmailing  the 
owner  of  the  rest  ?  Just  so,  the  value  of  a  strip  of  land 
unbroken  for  a  thousand  miles,  for  use  as  a  railway,  is 
something  immense  ;  while  the  same  land  cut  up  in  a 
thousand  sections,  never  to  be  united,  would  be  almost 


THE  NATURAL  TAX.  12? 

valueless.  For  purposes  of  transportation  it  would  have 
no  value  whatever. 

Again,  the  value  of  land  depends  upon  the  variety  of 
uses  to  which  it  may  lawfully  be  put.  Steam  railways, 
although  very  useful,  are  to  some  extent  a  nuisance.  The 
government  cannot  permit  them  to  be  operated  upon 
every  tract  of  land.  Consequently  land  owned  by  indi- 
viduals is  generally  restricted  to  other  uses ;  and  it  is 
therefore  worth  less  than  land  owned  by  railway  com- 
panies. 

§  13  Other  franchises.  The  franchise  of  a  telegraph 
company  is  of  the  same  nature.  It  is  absolutely  nothing 
but  an  exclusive  privilege  to  extend  its  wires  over  land. 
But  this  is  a  privilege  of  enormous  value.  The  founders 
of  the  Western  Union  Telegraph  Company  have  man- 
aged to  sell  this  privilege  to  investors  in  its  stock,  for  at 
least  $50,000,000. 

The  franchises  of  gas  companies,  electric  light  com- 
panies, steam  heating  companies,  water  works,  and  the 
like,  consist  so  obviously  of  mere  privileges  to  use  unim- 
proved land  as  to  need  no  explanation.  Street  railroads, 
also,  so  palpably  own  no  privileges,  other  than  the  mere 
right  to  run  over  bare  land,  that  it  seems  almost  an  insult 
to  the  understanding  of  any  reader  to  explain  the  case. 
None  of  these  corporations  have  any  other  franchises, 
than  these  rights  over  land.  For  these  franchises,  most 
of  them  have  paid  enormous  bribes  to  legislators  and 
aldermen.  Upon  these  franchises  they  have  issued  vast 
amounts  of  stock  and  bonds.  One  such  corporation,  after 
purchasing  all  the  rails,  equipment,  and  other  produc- 
tions of  human  labor  connected  with  the  road,  for  about 
$200,000,  proceeded  to  issue  $8,000,000  of  stock  and 
bonds,  upon  its  land  privileges. 

It  will  be  said  that  there  are  general  railway  laws,  so 


128  NATURAL    TAXATION. 

that  anybody  can  construct  a  new  rival  line,  and  thus 
destroy  the  land  values  of  an  existing  line.  Whenever 
that  can  really  be  done,  the  truth  of  this  theory  is 
promptly  proved,  by  the  destruction  of  stock  values  in 
both  corporations,  as  in  the  desperate  struggle  between 
the  New  York  Central  and  the  West  Shore  lines,  in  1884 
But  this  is  only  partially  true.  A  rival  line  must  run 
through  towns  and  very  near  cities  ;  or  it  can  get  little 
business.  The  aldermen  of  every  city  must  be  bought 
up  ;  and  as  the  old  corporation  will  pay  liberal  bribes  to 
induce  the  aldermen  to  do  nothing,  the  new  one  must 
bring  far  more  liberal  considerations  to  bear  upon  our 
patriotic  rulers.  Nor  is  it  merely  a  question  of  money. 
Bribery  must  be  conducted  decently  and  in  order.  Pub- 
lic sentiment  must  be  judiciously  worked  up  to  support 
the  scheme.  It  requires  an  immense  amount  of  ingenious 
and  well  directed  effort  to  carry  any  such  project  into  effect. 

In  the  case  of  street  railroads,  telegraphic  subways, 
gasworks,  and  other  privileges  in  cities,  it  is  obvious  that 
the  limit  is  soon  reached  ;  and  even  the  liberality  of  a 
legislature  or  a  board  of  aldermen  cannot  make  room  for 
many  rival  schemes  of  this  kind.  The  streets  cannot  be 
torn  up  forever  ;  although,  in  New  York  and  Brooklyn, 
they  do  not  fall  much  short  of  this.  The  limits  imposed 
by  nature  are  such  that  more  than  three  fourths  of  the 
whole  market  values  of  the  stock  and  bonds  of  corpora- 
tions, having  these  municipal  privileges,  consist  of  pure 
land  values. 

Under  the  present  system,  in  most  cases,  all  these  enor- 
mous values  go  untaxed.  The  law  of  New  York  distinctly 
exempts  franchises  from  taxation  ;  although  it  is  well 
settled  that  they  would  be  taxable  as  "  land  "  but  for  this 
legislative  interference.  Under  the  system  here  proposed 
all  these  values  would  be  fairly  taxed. 


• 

UNIVI 


THE  NATURAL  TAX. 


§  14.  Can  the  rent  tax  be  shifted  ?  While  the  Duke 
of  Argyll  and  all  his  landlord  allies  rend  the  air  with  their 
denunciations  of  the  proposed  tax  on  rent,  as  confiscation 
and  robbery,  other  opponents  of  the  tax,  appreciating 
the  fact  that  tenants  far  out-number  landlords  at  the 
polls,  devote  their  energy  to  proving  that  this  tax  would 
all  be  shifted  upon  tenants,  by  an  increase  of  rent,  so  that 
landlords  would  finally  pay  none  of  it.  If  this  were  true, 
then  no  relief  from  the  unequal  distribution  of  wealth 
can  be  had  ;  for  all  direct  taxes  would  ultimately  fall  upon 
consumption,  just  as  surely  as  do  indirect  taxes.  In  short, 
no  tax  would  be  really  direct.  The  greatest  benefit  thus 
far  held  out,  as  the  result  of  adopting  an  exclusive  tax 
upon  ground  rent,  would  be  unattainable  under  that  or 
any  other  system. 

On  the  other  hand,  if  this  doctrine  is  true,  the  indigna- 
tion of  the  Duke  of  Argyll  and  all  the  great  landlords  of 
Great  Britain  and  Ireland  is  absurdly  misdirected.  If 
they  can  recover  this  tax  from  their  tenants,  precisely  as 
the  importer  of  foreign  goods  recovers  customs  taxes 
from  the  purchasers  of  those  goods,  they  will  lose  nothing 
by  the  change,  and  may  even  profit  by  it.  It  is  very 
clear  that  the  landlords  do  not  believe  a  word  of  this  doc- 
trine of  shifting  taxation  ;  for  if  they  did  they  would  look 
with  indifference,  if  not  with  positive  favor,  upon  the 
taxation  o.f  ground  rents.  So  far  from  doing  this,  dukes, 
earls,  and  marquises  are  eagerly  struggling  in  England  for 
election  as  councilmen  and  aldermen,  for  the  sole  pur- 
pose of  preventing  the  taxation  of  ground  rents. 

The  weight  of  authority  upon  such  a  question  is  wor- 
thy of  attention,  although  by  no  means  decisive.  Now, 
while  a  few  respectable  and  sincere  students  of  economic 
science  hold  to  the  doctrine  of  the  transferability  of  the 
ground-rent  tax  to  the  tenants,  no  one  will  dispute  that 


130  NATURAL    TAXATION. 

an  overwhelming  weight  of  authority,  both  in  numbers 
and  in  reputation,  scout  that  doctrine  as  absurd.  Not 
only  the  entire  school  of  Ricardo  and  Mill,  but  also 
nine  tenths  or  more  of  other  economic  writers  make  it 
a  fundamental  doctrine  of  their  science  that  such  a  tax 
never  can  be  transferred  to  tenants. 

§  15.  The  question  illustrated.  Let  us,  however,  con- 
sider the  question  for  ourselves,  as  if  it  were  entirely  new. 
The  simplest  way  of  testing  it  is  to  imagine  that  the  tax 
was  made  heavy  enough  to  absorb  the  whole  rent.  For, 
although  this  is  impossible,  it  really  makes  no  difference 
whether  half  or  the  whole  of  rent  is  taken  by  taxation, 
so  long  as  the  state  is  determined  to  take  some  fixed  pro- 
portion of  rent.  Any  good  accountant  can  satisfy  him- 
self that  the  result  would  be  the  same  under  either  plan. 
But  persons  unaccustomed  to  figures  could  not  follow 
any  other  calculation  so  easily  as  they  can  follow  one 
based  upon  a  tax  equal  to  the  whole  rent. 

Let  us  then  suppose  the  "  single  tax  unlimited  "  to  be 
in  operation.  Let  us  suppose  the  total  ground  rent  of  the 
United  States  to  be  $1,000,000,000.  The  total  production 
of  the  nation  does  not  exceed  $13,000,000,000  per  annum. 
Out  of  this,  65,000,000  people  have  to  draw  their  living 
expenses.  Even  if  they  had  no  ground  rent  and  no 
taxes  to  pay  they  could  not  possibly  save  $5,000,000,000 
a  year.  But  suppose  they  could.  The  landlords  collect 
in  rent  $  1 ,000,000,000.  The  government  takes  the  whole 
of  this  in  taxes.  The  landlords  then  shift  the  tax  upon 
the  tenants,  and  insist  upon  collecting  $2,000,000,000  in 
rent.  But  the  government  next  year  taxes  the  whole  of 
this  increased  sum  out  of  the  landlords.  The  landlords 
then  raise  their  rent  to  $3,000,000,000.  But  the  govern- 
ment immediately  takes  the  whole  of  that  in  taxes.  The 
landlords  raise  their  rent  to  $4,000,000,000.  The  govern- 


THE   NATURAL  TAX.  13! 

ment  again  takes  it  all.  They  raise  rent  once  more  to 
$5,000,000,000.  Again  it  is  all  swallowed  up  in  taxes. 
Will  the  landlords  raise  their  rent  again  ?  How  can  they  ? 
They  would  by  that  time  have  taken  every  dollar  that 
tenants  earned,  over  the  barest  living  ;  and  if  they  at- 
tempted to  extort  another  dollar,  some  tenant  would  die 
of  starvation  ;  and  rents  would  fall,  from  lack  of  tenants. 
And  as  the  government  would  have  extracted  the  whole 
of  their  rent,  they  would  have  gained  not  a  dollar  by  their 
persistent  oppression  of  their  tenants. 

§  16.  Distinction  between  land  and  houses.  It  will 
be  said  that  nothing  of  this  kind  could  really  be  done 
by  any  government.  Quite  true  ;  but  that  is  simply 
because  nothing  of  the  kind  could  be  done  by  landlords. 
Landlords  know,  to  their  cost,  that  it  takes  three  or  four 
years  to  enable  them  to  recover  from  tenants  even  in- 
creased taxation  upon  houses ;  although  they  will  recover 
it  in  the  end.  But,  since  it  is  difficult  to  recover  a  tax 
which  tends  to  diminish  the  number  of  houses,  how  vastly 
more  difficult  must  it  be  to  recover  a  tax  upon  the  value 
of  land,  which  has  no  tendency  whatever  to  diminish  the 
amount  of  available  land. 

And  here  the  reader  can  see  the  reason  for  the  dis- 
tinction. If  owners  of  houses  cannot  recover  from  ten- 
ants the  tax  upon  houses,  nobody  will  build  any  more 
houses  for  renting.  But  the  owner  of  land  cannot  create 
any  more  land,  no  matter  how  liberally  he  may  be  paid 
for  it ;  and  he  cannot  diminish  the  area  of  land,  no  matter 
how  little  he  may  receive  for  it.  Every  increase  of  taxa- 
tion upon  ground  rents  makes  it  more  difficult  to  keep  land 
out  of  use  ;  and  therefore  it  increases  the  competition 
between  landlords  to  get  tenants.  Under  a  light  tax 
upon  ground  rents,  two  tenants  pursue  one  landlord.  But 
under  a  heavy  tax,  two  landlords  pursue  one  tenant.  If 


132  NATURAL    TAXATION. 

ground  rents  should  be  taxed  even  to  half  their  amount, 
landlords  without  tenants  would  be  compelled  to  sell  at 
any  price  to  other  landlords  who  could  get  tenants.  The 
tendency  of  all  taxes  upon  ground  rents,  therefore,  is  to 
reduce  rent,  rather  than  to  increase  it ;  and  this  makes  the 
very  idea  of  a  transfer  of  such  taxes  to  the  tenant  utterly 
absurd. 

A  moment's  reflection  will  satisfy  every  one  that  land- 
lords charge  just  as  much  for  their  land  as  they  can  possi- 
bly get,  except  in  special  cases  of  good  nature,  charity,  or 
ignorance.1  In  all  ordinary  cases  the  only  reason  why  they 
do  not  charge  more  is  that  they  cannot  find  anybody  able 
and  willing  to  pay  more.  How  can  this  condition  be 
changed  by  taxes  upon  rent  ?  It  is  not  and  it  cannot  be. 
The  average  landlord  will  charge  the  highest  rent  which 
he  can  get,  tax  or  no  tax.  And,  as  no  man  will  ever  get 
more  than  he  can  get,  no  amount  of  tax  upon  ground 
rents  will  ever  be  shifted  over  to  tenants  by  an  increase  of 
rents. 

§  17.  Amount  of  the  tax  on  rent.  It  does  not  follow 
that  the  state  should  compel  the  landlord  to  pay  over  all 
that  he  receives.  If  the  state  could  and  should  do  this, 
the  landlord  would  cease  to  do  his  work  ;  because  he  would 
receive  no  compensation  for  it.  Natural  laws  again  settle 
this  question,  by  making  such  exact  collection  impossible. 
Not  all  the  power  of  all  governments,  concentrated  upon 
the  landlords  of  a  single  town,  could  extract  from  them 

1  This  is  universally  true  in  the  United  States.  In  many  parts  of  Europe, 
especially  in  England,  agricultural  rents  are  limited  by  custom  and  public 
opinion.  In  Ireland,  they  are  often  limited  by  law.  But  all  that  results 
from  such  restrictions  is  that  rent  is  divided  between  two  or  more  landlords. 
The  mass  of  the  people,  who  are  the  real,  final  tenants,  gain  nothing  what- 
ever. The  farm-tenant  either  sublets  the  farm,  at  a  higher  rent,  or  he  makes 
a  larger  profit  out  of  the  farm,  without  selling  his  produce  any  cheaper  or 
paying  a  penny  more  wages  to  his  laborers. 


THE  NATURAL  TAX.  133 

precisely  one  hundred  per  cent,  of  the  rent  received  by 
them. 

Nor  does  it  follow  that  even  ninety  per  cent,  of  rent  ought 
to  be  taken.  Where  rents  are  large  the  retention  of  ten 
or  even  five  per  cent,  might  be  sufficient  to  induce  land- 
lords to  follow  up  tenants  and  extract  from  them  that  just 
rent  which  every  one  ought  to  pay.  Where  rents  are  small 
a  commission  of  ten  or  even  fifteen  per  cent,  may  be  in- 
sufficient for  this  purpose.  An  iron  rule  is  not  a  natural 
rule  ;  and  it  will  not  work  well. 

What  would  Nature  or  Science  dictate  upon  this  point? 
Is  it  not  that  the  state  should  collect  from  the  natural  tax 
collectors  whatever  amount  the  state  really  needs,  for  the 
effective  but  economical  administration  of  government? 
Is  it  not  better,  in  case  there  should  remain  any  considera- 
ble excess  over  this,  that  it  should  remain  in  private  hands, 
rather  than  it  should  be  taken  by  trie  state,  before  the 
state  officers  know  how  to  use  it  for  the  real  benefit  of  the 
people  at  large?  Grant,  if  you  please,  that  there  would 
be  such  surplus  of  rent  as  to  breed  wasteful  luxury  among 
landlords,  is  not  this  less  injurious  to  the  community  than 
wholesale  waste  and  embezzlement  of  public  funds?  Our 
whole  national  history  illustrates  the  truth  that  surplus 
public  revenues  first  corrupt  public  officers  and  then  de- 
bauch the  nation  itself. 

But  in  fact,  in  the  long  run,  there  will  be  no  such  ques- 
tion to  decide.  The  honest  needs  of  public  government 
grow  faster  than  population  and  fully  as  fast  as  wealth 
itself.  Local  taxation  will  increase  rapidly  ;  and  it  ought 
to  do  so.  Such  taxation  increased  in  Ohio,  for  example, 
1400  per  cent,  in  forty  years,  between  1846  and  1886;  while 
population  increased  only  100  per  cent,  and  wealth  1000 
per  cent.  It  is  more  likely  that  vigilance  will  be  needed 
to  prevent  the  taxation  of  rent  from  rising  too  fast,  than 


134  NATURAL    TAXATION. 

that  it  would  be  required  to  keep  landlords  from  retaining 
too  much.  This  does  not  imply  that  ground  rent  will  not 
be  sufficient  to  supply  many,  possibly  all,  of  those  addi- 
tions to  human  happiness  which  Henry  George  has  pic- 
tured in  such  glowing  words.  But  such  extensions  of  the 
sphere  of  government  must  take  place  gradually  ;  or  they 
will  be  ruinous  failures,  simply  because  the  state  cannot 
at  once  furnish  the  necessary  machinery  for  their  success- 
ful operation. 

This  natural  tax  might  be  adopted  in  one  day,  not  only 
without  injury  to  the  nation,  but  with  positive  benefit  to 
more  than  nine  tenths  of  all  the  people.  But  this  would 
be  strictly  upon  condition  that  the  amount  collected  for 
public  use  should  not  at  first  exceed  that  which  was  pre- 
viously collected.  Indeed,  it  would  be  essential  to  the 
permanence  of  such  taxation  that  public  revenues  should 
be  at  the  beginning  of  the  new  system  even  smaller  than 
they  were  immediately  before.  And  we  may  be  perfectly 
sure  that  they  would  be.  A  body  of  4,000,000  taxpayers 
will  take  care  of  that. 

§  18.  New  benefits  shared  with  landlords.  There  is, 
nevertheless,  a  certain  element  of  truth  underlying  the 
idea  that  a  rent-tax  can  be  shifted.  While  it  is  not  true 
that  one  dollar  of  the  tax  can  be  transferred  to  the 
tenant,  in  any  case  where  rent  is  fixed  upon  strictly  busi- 
ness principles,  it  is  true  that,  in  many  places,  and  espe- 
cially in  rural  districts  of  England,  the  owners  of  farm 
lands  do  not  charge  the  full  market  value  of  the  land  to 
their  tenants.  Personal  considerations,  kindness  of  feeling, 
custom,  long-continued  relations  between  the  families  of 
the  landlord  and  the  tenant,  public  opinion,  tradition,  the 
desire  to  control  votes,  and  many  similiar  influences  keep 
rents  below  their  market  value.  Under  a  system  of  tax- 
ation, concentrated  upon  rents,  these  influences  would  lose 


THE   NATURAL    TAX.  135 

much  of  their  power.  Under  a  tax,  deliberately  raised  to 
the  highest  practicable  point,  these  influences  would  lose 
all  of  their  power.  Tenants  would,  therefore,  find  their 
rents  increased  to  the  full  value  of  the  land.  Here  would 
seem  to  be  a  real  shifting  of  the  tax. 

But  this  would  be  only  a  seeming,  not  a  reality.  The 
tenants,  who  now  receive  the  benefit  of  those  influences, 
are  in  reality  themselves  landlords,  to  that  extent.  They 
divide  economic  rent  with  their  landlords.  They  do  not 
divide  the  rent,  thus  left  in  their  pockets,  with  the  com- 
munity at  large.  They  do  not  reduce  the  prices  of  their 
products  or  charge  any  less  for  their  services.  Many  of 
them  sublet  a  part  of  the  land  to  others,  to  whom  they 
charge  the  full  market  price.  The  community,  as  a  whole, 
pays  just  as  much  rent,  when  the  duke  allows  the  farmer 
to  occupy  land  at  20  per  cent,  below  its  full  value,  as  it 
does  when  the  duke's  creditors  seize  his  land  and  make 
the  farmer  pay  the  last  penny  that  the  land  is  worth. 
The  farmer  sells  wheat  at  the  same  price  and  pays  to  his 
laborers  the  same  wages,  in  either  case.  But  there  is  a 
good  deal  of  difference  in  the  style  of  his  daughters' 
dresses  and  the  length  of  his  annual  vacation. 

There  is  another  result  which  must  follow,  if  the  com- 
munity gains  in  wealth  and  happiness,  through  this  change 
in  methods  of  taxation.  Every  advance  in  prosperity — 
every  widespread  increase  in  wealth,  tends  to  increase  rent. 
If  it  is  true,  as  will  be  presently  maintained,  that  this  re- 
form in  taxation  will  stimulate  production,  increase  wages, 
promote  the  development  of  industry,  add  to  the  profits 
of  capital  and  reward  the  efforts  of  skill,  then  there  will  be 
a  greatly  increased  demand  for  the  locations  which  offer 
the  best  natural  opportunities  for  the  use  of  capital,  labor 
and  skill ;  and  ground  rents  will  rise.  But  this  is  not  the 
shifting  of  an  old  burden  ;  it  is  the  sharing  of  a  new  benefit. 


CHAPTER  X. 
ONE  TAX  ENOUGH. 

§  I.  Adverse  statements  considered.  Is  this  one  tax 
enough?  Can  all  the  needs  of  government  be  supplied 
by  a  tax  upon  ground  rent  alone  ? 

Ambitious  philosophers,  on  both  sides  of  the  Atlantic, 
have  convinced  themselves  tharirrnTncmmtry  is  economic 
rent  (the  annual  value  of  land  alone)  large  enough  to 
pay  even  the  existing  taxes.  This  assumption  was  first 
brought  forward  to  serve  as  an  argument  in  England, 
with  an  air  of  triumph  which  has  seduced  American  phi- 
losophers into  reliance  upon  the  same  theory.  It  was  as- 
serted by  Mr.  W.  H.  Mallock  and  others,  with  the  utmost 
confidence,  that  the  whole  rental  of  Great  Britain  and 
Ireland  would  not  suffice,  within  many  million  pounds,  to 
pay  the  existing  annual  taxes,  national  and  local.  This 
assertion  was  supported  by  a  bristling  array  of  figures, 
not  in  round  numbers,  but  with  an  impressive  detail,  im- 
plying absolute  accuracy.  We  need  not  imitate  this  pre- 
tended accuracy,  but  may  concede  that  the  average  British 
and  Irish  taxes,  imperial  and  local,  for  several  years  past 
(excluding,  of  course,  postal  and  telegraph  revenues,  etc.) 
have  amounted  to  about  £i  18,000,000  sterling.  Mr.  Mal- 
lock calls  the  total  rental  of  land  in  Great  Britain  and 
Ireland  ,£99,000,000.' 

^Property  and  Progress ,  p.  214. 
136 


ONE    TAX  ENOUGH.  137 

Professor  William  T.  Harris  improves  upon  Mr.  Mai- 
lock,  and  states  the  annual  rent  of  all  land  in  Great  Britain 
and  Ireland  at  £65,442,000  (Forum,  July,  1887). 

Mr.  George  Gunton  (Forum,  March,  1887)  presents,  with 
"  crushing  "  confidence,  a  third  and  entirely  different  state- 
ment of  British  and  Irish  rents,  fixing  them,  with  mathe- 
matical accuracy,  at  £131,468,288;  being  double  the 
estimate  of  Professor  Harris  and  nearly  one  third  more 
than  that  of  Mr.  Mallock. 

It  is  obvious  that  all  these  learned  philosophers  cannot 
be  right  ;  and  therefore  it  is  not  surprising  to  find  that 
all  of  them  are  wrong.  What  is  surprising  is  that  their 
errors  are  so  enormous,  that  they  are  caused  by  the  use  of 
second-hand  authorities,  yet  could  not  have  been  made  if 
even  those  authorities  had  been  read  with  ordinary  care, 
and  that  they  prove  an  entire  ignorance  of  the  subject 
treated. 

All  of  their  figures  are  absurdly  erroneous.  All  of 
these  gentlemen  have  used  tables  which  excluded  every 
penny  of  rent  collected  in  the  city  of  London  /  All  of  them 
have  excluded  the  value  of  land  in  railways,  canals,  mines, 
etc.  Mr.  Mallock  further  excludes  all  the  rent  of  Scotland 
and  Ireland.  Prof.  Harris  caps  the  climax,  by  excluding 
the  rent  of  all  land  not  used  for  farming  or  similar  rural 
purposes  ! 

When  a  city  population  of  over  4,000,000  pay  no  rent, 
and  when  houses,  railways,  canals,  gasworks,  and  mines 
can  hang  in  the  air  without  earthly  support,  these  statis- 
tics may  have  some  value,  but  not  until  then. 

§  2.  Mr.  Atkinson  on  Boston  rents.  Space  would  fail 
to  enumerate  all  the  professors,  doctors  of  philosophy, 
editors,  and  essayists  who  have  followed  the  same  line  of 
argument  in  America,  and  have  demonstrated,  to  their 
own  satisfaction,  that  American  ground  rents  could  never 


138  NATURAL    TAXATION. 

suffice  to  meet  the  necessary  burdens  of  taxation.  One 
example  will  suffice  for  all ;  and  a  quotation  from  Mr. 
Edward  Atkinson  (Forum,  February,  1889)  will  cover  all 
that  has  been  said  by  any  one  on  that  side.  He  says  : 

"It  is  also  probably  an  error  to  suppose  that  the  present  rental  value  of 
land,  taken  by  itself,  including  that  somewhat  indefinite  factor,  the  so-called 
4  unearned  increment,'  even  if  it  could  all  be  converted  to  public  use  in 
payment  of  taxes,  would  suffice  to  meet  the  necessary  expenses  of  govern- 
ment even  for  state,  city,  and  town  purposes.  For  several  years  the  assess- 
ors of  the  city  of  Boston,  where  the  present  valuation  of  land  is  very  high, 
have  kept  the  valuation  of  land  for  the  purpose  of  taxation,  separate  from 
that  of  buildings  and  personal  property.  The  valuation  of  the  city  for  the 
year  1888  was  $764,000,000,  on  which  a  tax  is  to  be  assessed  of  $10,000,000 
for  city,  county,  and  state  purposes,  at  the  rate  of  $13.50  on  each  $1000 
worth  of  property.  Land  and  buildings  are  assessed  nearly  if  not  quite  up 
to  the  market  value.  Personal  property  is  reached  by  the  assessors  of  the 
city  of  Boston  in  larger  measure  than  in  any  other  city  in  the  country.  At 
the  average  of  recent  years,  the  value  of  land  is  $333,000,000  ;  of  buildings 
and  improvements,  $230,000,000 ;  of  personal  property,  $201,000,000.  In 
order  to  raise  $10,000,000  revenue  the  tax  upon  the  whole  must  be  $13.50 
on  each  $1000.  If  the  assessment  were  made  upon  real  estate,  including 
land  and  buildings,  the  rate  would  be  $17.75;  or»  making  allowance  for 
abatements,  $18.50.  If  assessed  on  land  value  only,  the  assessment  would 
be  a  little  over  $33,  allowing  for  abatements  about  $35,  on  each  $1000.  It 
is  doubtful  if  the  rental  now  obtained  by  the  owners  of  all  the  land  of  Bos- 
ton would  more  than  meet  the  $10,000,000  expenses  of  the  state  and  city, 
omitting  wholly  the  amount  required  by  the  nation.  It  must  be  remem- 
bered that  our  national  taxes  amount  to  a  sum  as  large,  if  not  larger,  than 
all  the  state,  county,  city,  and  town  taxes  combined." 

A  close  examination  of  all  figures  of  this  kind  would 
disclose  a  great  undervaluation  of  land,  arising  from  the 
universal  practice  of  assessors  to  rate  vacant  land  held 
for  speculative  purposes,  much  lower  than  occupied  land 
having  precisely  similar  market  value.  But  we  should  be 
so  grateful  to  our  opponents  for  condescending  to  drop  into 
figures  of  any  kind,  as  to  accept  Mr.  Atkinson's  statistics 
without  troublesome  criticism.  For  these  figures,  incor- 


OXE  TAX  ENOUGH.  139 

rect  as  they  are,  nevertheless  fully  suffice  to  refute  the 
argument  which  they  are  brought  forward  to  support. 

§3.  What  the  critics  have  overlooked.  All  critics  of 
this  class  have  overlooked  the  transparent  fact  that  ground 
rent  already  bears  a  certain  proportion  of  taxation,  and 
that  when  it  is  proposed  to  put  all  taxes  upon  rent,  the 
taxes  now  borne  by  rent  must  be  deducted  from  the  total 
amount,  before  reckoning  the  amount  which  would  be 
cast  upon  rent  by  such  a  change  in  taxation. 

They  have  also  overlooked  the  equally  obvious  fact  that 
the  market  price  of  land  is  always  reduced  by  the  capital- 
ized value  of  the  taxes  already  upon  it.  For  the  price 
of  land  being  nothing  more  than  the  capitalized  value  of 
the  net  rent  which  can  be  derived  from  it,  that  value  is 
invariably  as  much  smaller,  in  proportion  to  the  value 
which  it  would  have  if  untaxed,  as  the  net  rent  is  smaller 
than  the  gross  rent. 

To  illustrate  :  If  the  gross  rent  of  a  tract  of  land  is 
$1000  a  year,  and  it  is  subject  to  no  taxes,  the  market 
value,  assuming  the  usual  rate  of  interest  to  be  5  per  cent, 
will  be  $20,000.  But  if  it  is  subject  to  an  annual  tax  of 
$200,  the  net  rent  being  thus  reduced  by  20  per  cent,  the 
price  of  the  land  will  also  be  reduced  by  20  per  cent, 
to  $16,000.  If  putting  all  the  taxes  upon  rent  would 
require  a  tax  upon  rent  of  $500  a  year,  this  would  only 
mean  an  addition  of  $300  to  the  tax ;  because  the  land 
was  paying  $200  already.  But  Mr.  Mallock,  Mr.  Atkinson, 
and  similar  critics  always  assume  that  this  change  would 
involve  the  putting  of  an  additional  $500  on  the  rent, 
ignoring  the  fact  that  it  already  pays  $200  of  the  amount. 

§  4.  Fundamental  principles.  The  principles  govern- 
ing these  questions  can  be  stated  in  a  few  brief  proposi- 
tions. 

i.  In    economic    science    "  rent  "   means  only  ground 


I4O  NATURAL    TAXATION. 

rent,  or  the  price  which  can  be  obtained  for  the  use  of  the 
land  alone,  irrespective  of  improvements. 

2.  Ground  rent,  strictly  speaking,  is  the  amount  paid  by 
the  tenant  for  the  use  of  the  land,  without  any  deduction 
whatever,  for  taxes  or  anything  else. 

3.  The   market  price   or  value  of  land,   however,  is  al- 
ways based  upon  an  estimate   of  the  probable  net  rent, 
deducting  taxes. 

4.  The  market  value  of  a  perpetual  title  to  land  is  equal 
to  the  expected  net  annual  rent  (deducting  taxes),  multi- 
plied by  the  number  of  years  which,  multiplied  by  the 
current    rate    of  interest,  would    produce    one    hundred. 
Thus,  if  interest  is  five  per  cent.,  the  title  is  worth  twenty 
years'  net  rent. 

5.  The  value  of  such  a  title,  in  economic  science,  is  the 
same,  only  not  deducting  taxes. 

6.  The   annual  value  or  ground   rent    of  land,  in   eco- 
nomic science,  is  on  the  average  equal  to  the  usual  rate  of 
interest   upon  the  market  value  of  its  perpetual  title,  with 
the   addition    of    all    taxes    annually    levied    exclusively 
upon  that  value. 

The  strictly  scientific  method  of  ascertaining  the  pro- 
portion of  ground  rent  which  would  be  taken  by  taxation 
if  all  taxes  were  concentrated  upon  it,  would  be  to  add 
the  taxes  now  borne  by  rent  to  the  present  net  rent,  and 
then  reckon  the  proportion  of  gross  taxes  to  this  gross 
rent.  But  as  the  writer  made  a  calculation  upon  this 
principle  some  years  ago,  and  it  has  apparently  been 
too  difficult  for  these  critics  to  comprehend,  a  simpler 
method  will  now  be  adopted,  more  in  accordance  with  the 
usages  of  real-estate  dealers. 

We  will  ascertain  as  nearly  as  possible  : 

I.  The  present  net  ground  rent  of  a  few  important 
countries,  states,  and  cities; 


ONE  TAX  ENOUGH.  141 

2.  The  entire  burden  of  taxation  in  these  places  ; 

3.  The  amount  of  such  taxation  now  borne  by  ground 
rent  ; 

4.  The  amount  of  taxation   which  would  be  added  to 
the  present  taxes  on   ground  rent,  if  all  taxes   were   col- 
lected from  them,  and  which,  therefore,  is  all  that  would 
be  taken   out  of  the  net    rents   which  land-owners    now 
receive  ; 

5.  The  proportion   of  net    ground  rent  now  collected 
by  landlords,  and    remaining   in  their  hands  after  paying 
existing  taxes,  which  would  be   taken  by  this  change  in 
methods  of  taxation. 

In  these  statistics,  we  shall  take  the  liberty  of  generally 
omitting  fractions  of  a  thousand  dollars  or  pounds,  count- 
ing everything  under  five  hundred  as  nothing,  and  every- 
thing above  five  hundred  as  one  thousand.  The  results 
will  be  just  as  correct  as  if  the  usual  wearisome  details 
were  given  ;  and  the  figures  will  be  vastly  more  intelligible. 

§  5.  Proportion  of  land  values  to  real  estate.  We 
shall  adopt  the  uniform  rule  of  estimating  the  value  of 
the  bare  land  at  60  per  cent,  of  the  value  of  all  real  estate. 
The  substantial  correctness  of  this  estimate  could  be 
proved  by  an  enormous  mass  of  statistics.  It  is  sufficient, 
however,  to  refer  to  the  peculiarly  careful  and  conscien- 
tious assessment  of  Boston,  already  quoted,  as  evidence  of 
the  fact  in  cities ;  while  the  analysis  of  the  .Massachusetts 
census,  which  will  presently  appear,1  as  well  as  the  in- 
vestigations of  the  Pennsylvania  Tax  Commission,  give 
evidence  of  the  fact  in  rural  districts.  The  Pennsylvania 
return,  it  is  true,  reduces  the  average  for  the  whole  State 
to  51^  per  cent.  But  the  returns  from  Philadelphia  and 
other  cities  are  plainly  erroneous.  They  put  the  value 
of  land  in  cities  other  than  Pittsburgh  at  only  34  per 

1  Appendix  to  Chapter  XII. 


142  NATURAL    TAXATION. 

cent,  of  real  estate.1  But  in  Pittsburgh  land  is  reported 
at  56  per  cent,  of  real  estate.  Outside  of  cities,  land 
is  reported  at  about  70  per  cent,  of  real  estate.  Correct- 
ing the  error  in  cities,  the  average  is  about  60  per  cent. 
A  comparison  of  assessment  returns  from  Boston,  Buffalo, 
Cincinnati,  Cleveland,  Minneapolis,  and  many  other  cities, 
demonstrates  that  the  60  per  cent,  rule  is,  to  say  the  least, 
fully  as  applicable  to  cities  as  it  is  to  improved  farms. 
Inquiry  into  British  land  values  strongly  indicates  that 
they  form  63  to  65  per  cent,  of  all  real-estate  values  there ; 
but  we  may  rest  upon  the  minimum  of  60  per  cent.,  as 
being  sufficiently  near  the  truth  to  meet  all  cases. 

It  has  been  already  shown  that  all  the  stationary  prop- 
erty and  franchises  of  railway,  telegraph,  gas,  electric  light, 
pipe  line,  steam  heating,  and  similar  companies  are  real 
estate,  and  that  by  far  the  greater  part  of  the  value  in  such 
concerns  is  a  pure  land  value.  These  concerns  will,  there- 
fore, be  so  treated,  without  further  explanation.  Much 
more  than  60  per  cent,  of  their  incomes  consists  of  pure 
ground  rent ;  but  they  shall  be  put  upon  the  same  footing 
with  all  other  real  estate.  With  this  allowance  the  tables 
hereafter  given  will  err  only  upon  the  side  of  our  oppo- 
nents. 

In  adopting  this  general  estimate  of  land  values  as  60 
per  cent,  of  all  real  estate,  the  estimate  elsewhere  of  a 
much  lower  proportion  of  such  values  in  farm  lands  is 
not  forgotten.  But  that  estimate  refers  only  to  cultivated 
farms,  which  constitute  but  a  small  part  of  the  real  estate 

1  This  error  is  probably  due  to  the  very  general  division  of  land  owner- 
ship, in  Philadelphia  and  Eastern  Pennsylvania  cities,  between  pure  ground 
rents  and  leaseholds.  The  value  of  a  long  lease  is  often  very  great ;  and 
this  is  part  of  economic  land  value  or  ground  rent.  The  owner  of  a  building, 
erected  upon  leased  land,  also  owns  the  leasehold  ;  and  the  usual  rise  in  city 
land  values  often  makes  the  leasehold  alone  worth  one  fourth  to  one  third 
of  the  fee. 


ONE  TAX  ENOUGH.  143 

values  of  the  United  States,  or  of  any  state  or  country. 
Town  lots  alone  far  exceed  in  value  all  the  farms  of  the 
United  States ;  and  among  them  the  value  of  the  land 
alone  exceeds  60  per  cent,  of  all  real  estate  values.  Un- 
cultivated and  unused  lands  form  an  enormous  part  of 
nominal  farm  values  ;  and  in  their  case,  the  pure  land  or 
ground-rent  value  is,  of  course,  100  per  cent,  of  the  whole. 
An  estimate  of  60  per  cent,  for  the  pure  land  value  of  all 
American  real  estate,  taken  together,  is  extremely  mode- 
rate. For  Great  Britain,  and  still  more  for  Ireland,  it  is 
far  too  low. 

However,  if  any  one  doubts  the  correctness  of  this  es- 
timate, he  can  easily  make  a  calculation,  on  the  basis  of 
those  which  follow,  but  reducing  land  values  to  50  per 
cent,  of  real  estate.  He  will  find  that  it  does  not  change 
the  general  result.  Nothing  short  of  a  bold  estimate  of 
30  per  cent,  as  the  proportion  of  land  values,  will  suffice 
to  refute  the  general  conclusions  here  reached.  Such  an 
estimate  would  be  absurd. 

§  6.  Rents  in  Great  Britain  and  Ireland.  The  theory 
of  the  insufficiency  of  Rent  to  meet  Taxes  having  origi- 
nated in  England,  it  is  as  well  to  begin  its  refutation  with 
that  country,  especially  as  its  statistics  of  income  are  more 
full  and  correct  than  those  of  any  other  country.  The 
returns  for  1885  will  be  used,  because  they  are  the  latest 
which  have  been  used  in  this  controversy  or  which  have 
been  made  the  basis  of  Mr.  Giffen's  valuable  estimates  of 
British  wealth. 

The  whole  amount  raised  by  taxation,  national  and 
local,  in  Great  Britain  and  Ireland  for  1885  was 
,£118,341,000.' 

The  official  returns  of  the  income  tax,  for  1885,"  show 

1  Stateman's   Year  Book,  1888,  p.  236. 

2  28th  Report  Internal  Revenue  Department, 


144  NATURAL    TAXATION. 

the  following  results.     For  the  sake  of  brevity  let  us  call 
these  "  British,"  instead  of  "  British  and  Irish  "  incomes : 

British  Net  Incomes  from  Real  Estate ;  Returned  in  1885. 
I.  From  pure  ground  rents  : 

Manors,  tithes,  fines,  etc £  853,000 

Fishing  and  shooting  rights.. .  .  572,000 

Market  privileges  and  tolls. . . .  607,000  2,032,000 

ii.  From  land  and  improvements  : 

Agricultural  lands £  65,442,000 

Houses  and  lots 127,050,000 

Canals,     water-works,    mines, 

iron-works,  gasworks,  etc..  .  22,381,000 

Railways 33,050,000 

^247,923,000 
60  %  of  this  is j£  148, 753,000 

Net  annual  ground  rents ^150, 785,000 

We  must  now  consider  the  taxes  which  have  been  levied 
upon  land,  and  which  have  therefore  been  deducted  from 
the  gross  rent  before  these  returns  were  made.  They  are 
as  follows  : 

Land  tax £     1,045,000 

Inhabited  house  duty 1,855,000 

Income  tax  on  rents 3,605,000 

Local  rates 37,846,000 

Tithes 4,054,000    £  48,405,000 

Sixty  per  cent,  of  this  amount,  being  ,£29,043,000,  must 
be  deducted  from  the  gross  amount  of  taxes,  because  the 
landlords  bear  this  already,  and  receive  the  ;£  150,785,000 
net. 

Gross  British  taxes ^"118,341,000 

Deduct  taxes  now  paid  from. . . 

ground  rents 29,043,000     £  89,298,000 

This  is  the  amount  which  would  be  collected  from  Brit- 
ish rents,  if  all  taxes  were  levied  upon  them.  It  is  almost 


ONE  TAX  ENOUGH.  145 

exactly  59  per  cent,  of  British  net  ground  rents,  leaving 
all  rent  from  houses  and  improvements  untaxed.  All 
British  and  Irish  taxes  could  be  paid  out  of  existing 
rents  and  yet  leave  to  the  landlords  a  clear  income  of 
^"61,487,000  ($300,000,000)  per  annum,  besides  their  house 
rents,  etc.,  amounting  to  at  least  as  much  more. 

But  this  is  a  great  understatement  of  the  truth.  It 
makes  no  account  whatever  of  the  constant  rise  in  value 
of  town  lots.  It  assumes  the  absolute  correctness  of  the 
returns  of  rent  made  by  landlords.  It  assumes  that  the 
tax  collectors  have  not  lost  sight  of  a  single  rent  or  failed 
to  collect  a  single  pound  of  what  was  due.  It  does  not 
reckon  the  annual  value  of  the  palaces  and  parks  of  princes, 
dukes,  earls,  and  other  men  of  wealth,  at  any  figure ;  be- 
cause these  places  bring  no  actual  income,  and  are  not  re- 
turned at  all  for  income  tax.  The  probability  is  that,  if 
all  such  values  could  be  ascertained,  all  the  taxes  of  Great 
Britain  would  not  absorb  45  per  cent,  of  the  present  net 
value  of  the  bare  land. 

§  7.  Rents  in  the  United  States.  The  census  of  1890 
estimates  the  total  real  "  wealth  "  of  the  United  States  at 
$65,037,091,197;  of  which  real  estate  is  set  down  at 
$39,544,544, 333. 1  But  of  this,  real  estate  to  the  real  value 
°f  $3,833,335,225  is  exempt  from  taxation  ;  and  as  there  is 
no  use  in  taxing  public  property,  only  to  pay  the  tax  out 
of  the  public  treasury,  exempt  property  may  as  well  be 
excluded  from  these  calculations. 

The  assessed  valuation  of  property  in  1890,  which  of 
course  has  little  relation  to  the  real  value,  was : 

Real  estate $18,956,556,675 

Personal  property 6,516,616,743 

Total $25,473,173,418 

1  It  has  been  denied  that  ground  rents  are  real  "  wealth."  But  they  are 
always  so  reckoned  in  statistics. 


146  NATURAL    TAXATION. 

Thus  it  will  be  seen  that  real  estate  constituted  74^  per 
cent,  of  all  assessed  property,  and  therefore  bore  that 
share  of  ad  valorem  taxes.  For  convenience,  this  share 
may  as  well  be  called  75  per  cent.  The  local  ad  valorem 
taxes  amounted  to  $470,652,000.  Reckoning  land  values 
as  usual  at  60  per  cent  of  real  estate,  these  values  bore 
60  per  cent,  of  75  per  cent,  of  all  local  ad  valorem  taxes. 
This  is  exactly  45  per  cent.,  leaving  55  per  cent,  to  be 
borne  by  land  improvements  and  personal  property. 
Special  taxes,  such  as  licenses,  succession  taxes,  corpora- 
tion taxes,  poll  taxes,  etc.,  are  not  included.  But,  as  a 
large  proportion  of  what  is  assessed  as  personal  property 
is  in  fact  real  estate  in  a  disguised  form,  the  probability  is 
that  real  estate  actually  bears  more  than  75  per  cent,  of 
all  local  taxes,  of  every  description. 

The  valuation  of  real  estate  in  the  census  was  certainly 
not  made  upon  any  lower  estimate  of  the  rate  of  interest 
than  5  per  cent,  as  even  that  would  value  land  at  twenty 
years'  purchase.  Only  a  small  part  of  American  real  es- 
tate could  be  sold  then  or  now  at  even  that  rate.  Never- 
theless, that  rate  is  here  accepted.  It  follows  that  rent 
must  be  reckoned  at  5  per  cent,  on  the  capitalized  value 
of  land,  since  "  land  "  in  law  is  nothing  but  a  name  for  a 
title  to  ground  rents. 

On  this  basis  the  following  results  are  reached.  They 
are  extremely  conservative  ;  that  is  to  say,  they  err  on  the 
side  opposed  to  the  argument  here  presented. 

True  Values  of  Real  Estate,  1890. 

Real  estate,  taxed  as  such1 $35,711,209,000 

Railways 8,685,407,000 

Mines  and  quarries 1,291,291,000 

Telegraphs  and  canals,  far   more    than          312,093,000 

Total $46,000,000,000 

Land  Values,  60  per  cent,  of  this $27,600,000,000 

1  Real  estate  worth  over  $3,800,000,000  is  exempt  from  all  taxation. 


ONE  TAX  ENOUGH.  147 

Ground  Rental  and  Taxes  in  the  U.  S. 

Rent,  at  5  %  on  $27,600,000,000 $1,380,000,000 

National  expenses $357,889,000 

Local  taxes  470,652,000 

$828,541,000 

Deduct  45  %  of  local  taxes,  already  laid  on 
rent 211,793,000 

Taxation  on  present  net  rents,   if  all  other 

taxes  are  repealed 616,147,000 

Surplus  rent $763,252,000 

Thus  all  national  and  local  taxes,  if  collected  exclusively 
from  ground  rents,  would  absorb  only  44^-  per  cent,  of 
those  rents,  leaving  to  the  owners  of  the  bare  land  a  clear 
annual  rent  of  $763,252,000,  besides  the  absolutely  untaxid 
income  from  all  buildings  and  improvements  upon  their  land. 

The  above  estimate  of  ground  rents  is  very  far  below 
the  reality.  It  does  not  include  one  dollar  for  the  enor- 
mous value  of  oil  wells,  gas  wells,  pipe  lines,  the  street 
privileges  of  gas,  electric  light,  steam  heating  or  water 
companies  and  other  land  privileges  not  expressly  enumer- 
ated. 

§  8.  Rents  in  Pennsylvania.  Owing  to  a  very  remark- 
able example  of  public  spirit,  the  State  of  Pennsylvania 
affords  an  opportunity  for  an  inquiry  of  this  kind,  un- 
equalled in  any  other  State.  A  Revenue  Commission  has 
been  formed  by  associations  of  private  citizens,  represent- 
ing all  interests,  which  has  pursued  a  line  of  thorough 
investigation  for  several  years  past.  Although  its  work 
is  still  incomplete  and  some  of  its  statistics  (as  already 
pointed  out)  are  plainly  erroneous,  they  have  been  pre- 
pared in  the  best  of  faith  and  with  unusual  care ;  while 
their  errors  are  easily  found  and  readily  corrected. 

In  round  numbers  the  Commission  estimates  the  entire 


148  NATURAL    TAXATION. 

wealth  of  Pennsylvania,  in  1892,  at  a  true  value  of 
$9,692, 000,000.  Of  this,  $1,250,000,000  are  reported  as 
"moneyed  capital."  This  is  an  obvious  error,  in  a  com- 
putation of  real  wealth.  Moneyed  capital  cannot  mean 
anything  else  than  debts  and  credits.  Whatever  it  adds 
at  one  end  of  the  total  wealth  must  be  taken  off  at  the 
other,  as  previously  explained  in  this  book.  Deducting 
this  item  there  remains  real  "  wealth  "  (reckoning  land 
values  as  part  of  wealth)  to  the  amount  of  $8,500,000,000. 
On  the  basis  of  a  full  report  of  fire  insurance  in  the  State, 
the  Commission  estimates  that  $5,000,000,000  of  this 
amount  is  of  an  insurable  nature,  that  is,  the  value  of 
buildings  and  chattels.  This  leaves  the  value  of  the  bare 
land  (which  is  the  only  thing  incapable  of  being  destroyed 
by  insurable  risks)  at  about  $3,500,000,000,  or  a  trifle  more 
than  41  per  cent,  of  the  value  of  all  wealth.  Now  this 
result,  which  is  reached  without  any  reference  to  the  na- 
tional census,  and  by  a  process  utterly  different  from  that 
which  led  to  the  conclusions  given  above,  as  to  the  United 
States  at  large,  is  nevertheless  in  perfect  harmony  with 
those  conclusions.  The  estimated  value  of  the  land  of 
the  United  States,  given  above,  was  42  per  cent,  of  all 
"  wealth."  The  estimate  of  land  values  in  Pennsylvania 
is  over  41  per  cent. 

The  entire  local  taxation  of  Pennsylvania  in  1892  was 
$49,383,906.  Of  this  there  was  levied  upon  real  estate, 
in  various  forms,  $36,000,000,  as  follows : 

Taxes  on  "  real  estate  " $32,645,631 

"        "  railways 2,146,331 

"       "  other    land-owning    corporations  : 

about  $1,200,000,  say 1,208,038 

$36,000,000 

Sixty  per  cent,  of  this  is  $21,600,000;  and  this  was  the 
amount  borne  by  the  land  values  of  Pennsylvania  in  1892. 


ONE  TAX  ENOUGH.  149 

The  proportion  of  federal  taxation  which  would  have 
fallen  upon  Pennsylvania,  had  federal  taxes  been  direct, 
and  levied  in  proportion  to  population,  as  required  by  the 
Constitution,  was  less  than  $30,000,000.  But  if  levied 
in  proportion  to  land  values  alone,  it  would  be  about 
§36,000,000.  These  figures  furnish  all  materials  neces- 
sary to  determine  the  effect  upon  Pennsylvania  land-own- 
ers of  a  concentration  of  taxes  upon  ground  rents. 

PENNSYLVANIA. 

Ground  Rents  and  Taxes  of  1892. 

Rent,  at  5  %  on  $3,500,00x5,000 $175,000,000 

Federal  taxes $36,000,000 

Local  taxes 49,384,000 


$85,384,000 
Deduct  60$  of  real-estate  taxes,  already  paid     21,600,000 


Taxation  on  present  net  rents,  if  all  other 

taxes  are  repealed 63,784,000 


Surplus  rent $111,216,000 

Thus  all  national  and  local  taxes,  if  collected  only  from 
ground  rents,  would  absorb  less  than  36  per  cent,  of  those 
rents  in  Pennsylvania,  leaving  to  the  land-owners  a  clear 
income  of  over  $111,000,000  per  annum,  besides  the 
untaxed  income  from  their  buildings  and  other  improve- 
ments. 

It  will  be  noticed  that  a  much  smaller  proportion  of 
ground  rent  seems  to  be  required  for  the  payment  of  all 
taxes  in  Pennsylvania,  than  in  the  United  States  at  large. 
This  apparent  discrepancy  is  due  to  the  fact  that  the 
valuation  of  real  estate,  made  by  the  Pennsylvania  Com- 
mission, was  25  per  cent,  higher  than  the  census  valuation 
of  1890. 


150  NATURAL    TAXATION. 

If  the  census  estimates  should  be  accepted  with  refer- 
ence to  Pennsylvania,  as  in  other  cases,  the  result  would 
be  as  follows : 

PENNSYLVANIA. 

Ground  Rents  in  1890  :    Taxes  in  1892. 

Land  values,  per  census  1890,  $2,810,000,000 

Rent  at  5  % $140,500,000 

Federal  taxes $36,000,000 

Local  taxes 49, 384,000 


$85,384,000 
Deduct  taxes  falling  on  ground  rents  in  1892     21,600,000 


Taxation  on  net  rents  of  1892,  if  all  other 

taxes  were  repealed 63,784,000 


Surplus  rent $76,716,000 

On  the  basis  of  the  census  estimates  of  value,  therefore, 
the  concentration  of  all  taxes  upon  ground  rents  would 
absorb  about  45^-  per  cent,  of  Pennsylvania  net  rents. 
This,  it  will  be  seen,  is  nearly  the  same  proportion  of  rent 
which  would  appear,  from  the  census,  to  be  subject  to 
absorption  by  such  taxation,  if  applied  to  the  United 
States  as  a  whole. 

§  9.  Rents  in  Connecticut.  The  State  of  Connecticut 
having  been  cited  by  some  advocates  of  the  personal 
property  tax,  as  an  example  of  the  insufficiency  of  ground 
rents  to  support  the  whole  burden  of  taxation,  let  us 
examine  its  record. 

It  appears,  by  the  report  of  the  Special  Commission  on 
Taxation,  in  1887,  that  the  local  taxes  of  Connecticut 
then  amounted  to  about  $6,600,000,  that  the  average  tax 
rate  was  ij  percent.,  but  railways  were  separately  assessed 
and  taxed  exactly  I  per  cent.  The  assessed  value  of  real 
estate  was  $25  1,000,000  ;  of  which  land  values,  at  the  usual 


ONE  TAX  ENOUGH.  15 1 

rate  of  60  per  cent.,  would  amount  to  $i  50,000,000.  Rail- 
way property  within  the  State  was  known  to  be  worth,  at 
regular  market  prices,  $62,000,000 ;  and  it  was  assessed  at 
its  full  value,  the  tax  being  made  low  on  account  of  the 
known  undervaluation  of  all  other  property.  The  land 
value  in  railways,  at  60  per  cent.,  amounted  to  $3 7, 000,000. 
The  census  of  1890  gives  the  following  returns  of  the 
true  market  value  of  real  estate  in  Connecticut. 

CONNECTICUT. 
True  Values  of  Real  Estate,  1890  : 

Real  estate,  returned  as  such $543,421,891 

Railways 54,55O,£O4 

Mines  and   quarries , 3,108,787 

Canals,   telegraphs,    etc.1 14,753,310 

$615,834,492 

Sixty  per  cent,  of  this  for  land  values  amounts  to  $369,- 
500,000.     We  can  now  calculate 

Connecticut  Ground  Rents,  i8go  /  and  Taxes,  1887. 

Net  ground  rent,  at  5  %  on  $369,500,000 $18,475,000 

Federal  taxes,  apportioned  on  basis  of  rents     $4,800,000 
Local  taxes 6,600,000 

$11,400,000 

Deduct  taxes  already  laid  on 
ordinary  land  values  : 

$150,000,000  at  ifo  % $2,812,500 

Do.  on  railways  at  T.% 370,000 3,182,500 


Taxation  on  present  net  rents,  if  all  other  taxes 

are  repealed 8,217, 5°° 

Surplus  rents $10,257,500 

1  This  item   includes  shipping.     But   as  gasworks  and  other  immensely 
valuable  franchises  on  land  are  not  included,  this  item  is  not  too  large. 


152  NATURAL    TAXATION. 

The  concentration  of  all  taxes  upon  the  ground  rents  of 
Connecticut,  therefore,  would  not  absorb  more  than  44^- 
per  cent,  of  those  net  rents,  leaving  to  the  land-owners  a 
clear  income  of  over  $10,000,000  per  annum,  besides  all 
their  income  from  buildings  and  improvements. 

§  10.  Rents  in  Boston.  For  the  purposes  of  solving 
the  problem  submitted  by  Mr.  Edward  Atkinson,  concern- 
ing the  city  of  Boston,  let  us  accept  his  figures,  although 
they  are  not  brought  quite  up  to  the  date  of  1890,  and 
certainly  understate  the  value  of  land. 

His  figures  are  given  for  1888,  and  areas  follows  : 

Land,  assessed  value $333,000,000 

Buildings,   "  " 230,000,000 

Personal  property  " 201,000,000 

The  whole  amount  of  State  and  local  taxes  in  Boston, 
in  1888,  is  given  by  Mr.  Atkinson  at  $10,000,000  per  an- 
num ;  and  he  estimates  the  national  taxes  at  "  a  sum  as 
large,  if  not  larger  than  all  the  State,  county,  city,  and  town 
taxes  combined."  But  in  this  he  is  much  mistaken.  For 
many  years  local  taxation  has  exceeded  national  taxation  ; 
and,  as  we  have  already  shown,  the  State  and  local  taxes 
assessed  upon  property  by  its  value,  exclusive  of  licenses, 
succession  taxes  and  many  others,  exceeded,  in  1890, 
the  whole  amount  of  national  expenditures  by  about 
$113,000,000.  In  1888  a  direct  tax  of  $300,000,000 
would  have  amply  sufficed  to  cover  all  the  expenditures 
of  the  federal  government,  pensions  included. 

Apportioned  according  to  population,  as  the  Constitu- 
tion requires,  Boston's  share  of  such  a  direct  tax  would 
have  been  $2,100,000.'  Apportioned  according  to  the 
value  of  land,  either  with  or  without  improvements,  Bos- 
ton's share  of  such  a  direct  tax  would  have  been  much 

1  Population,  1890  :  United  States,  62,622,000  ;  Boston,  446,000. 


ONE  TAX  ENOUGH.  153 

less  than  $4,500,000.  The  latter  figure  may  be  accepted, 
not  only  as  affording  stronger  support  to  Mr.  Atkinson's 
theory,  but  also  as  based  upon  just  principles,  in  accord- 
ance with,  which  it  may  be  assumed  that  the  Federal 
Constitution  would  be  amended,  whenever  strictly  direct 
taxation  is  adopted. 

It  may  be  assumed  with  entire  certainty,  in  this  case,  as 
in  others,  that  the  assessors'  estimate  of  the  value  of  real 
estate  was  based  upon  the  theory  that  it  was  renting  for 
at  least  5  per  cent,  per  annum,  net,  on  its  capital  value : 
for  it  is  incredible  that  the  assessors  should  have  valued 
land  at  more  than  twenty  times  its  annual  rent.  The  an- 
nual rental  value  of  the  bare  land  of  Boston  in  1888  was 
therefore  at  least  5  per  cent,  on  $333,000,000  ;  that  is  to 
say,  $16,650,000.  The  tax  rate  was  $13. 50  per  $1000,  or 
$4,500,000  on  the  bare  land. 

On  this  basis,  and  giving  the  benefit  of  every  doubt  in 
favor  of  Mr.  Atkinson's  views,  the  following  conclusions 
are  reached  : 

Boston  Ground  Rents  and  Taxes  in  1888. 

Ground  rent,  at  5  %  of  $333,000,000  $16,650,000 

Federal  taxes .$4,500,000 

Local  taxes 10,000,000 


14,500,000 
Deduct  taxes  on  land  values 

already  paid. 4,500,000 


Taxation  on  present  net  rents,  if  all 

other  taxes  are  repealed 10,000,000 


Surplus  rent $6,650,000 

Thus  all  national  and  local  taxes,  if  concentrated  upon 
the  ground  rents  actually  found  and  assessed  by  the 
assessors  of  Boston,  would  absorb  barely  60  per  cent,  of 
those  rents,  leaving  to  Boston  land-owners  a  clear  income 


154  NATURAL    TAXATION. 

of  over  $6,650,000  per  annum,  besides  the  untaxed 
income  from  buildings  and  other  improvements. 

§  ii.  Omissions  from  Boston  rents.  Thus  far  it  has 
been  assumed  that  the  figures  of  Boston  assessors,  upon 
which  Mr.  Atkinson  relies,  correctly  represent  the  market 
value  of  all  Boston  land. 

This  concession  has  been  made  for  the  sake  of  argu- 
ment ;  but  it  is  utterly  unjustifiable.  No  assessors  in  any 
city,  however  faithful  in  the  performance  of  their  duty, 
ever  appraised  land  at  its  full  market  value,  or  anywhere 
near  it.  If  the  Boston  assessors  have  appraised  land  at 
even  80  per  cent,  of  its  fair  value,  they  have  done  their 
duty  more  faithfully  than  any  other  assessors  in  the 
United  States.  It  may  be  said,  however,  that  assessors 
never  will  do  better,  and  therefore  that  in  estimating  the 
burden  of  taxation  under  the  proposed  system  we  must 
be  content  to  value  land  on  the  basis  of  the  best  known 
assessments.  The  answer  to  this  is,  that  we  are  not  now 
seeking  to  know  what  will  be  the  apparent  burden  of  tax- 
ation upon  ground  rents,  when  this  system  goes  into 
effect,  but  are  inquiring  what  would  be  the  real,  bona  fide 
burden  thus  imposed.  And  in  order  to  judge  of  this  we 
must  calculate  upon  the  basis  of  actual  values,  and  not  of 
mere  assessed  values. 

But  it  is  not  necessary  to  enter  into  this  question  just 
now.  Even  accepting  the  official  assessment,  these  figures 
show  upon  their  face  that  the  assessors  have  omitted  from 
their  estimate  of  land  values  in  Boston  some  items  of 
immense  importance.  Where  is  there  any  account  made 
of  the  privileges  conferred  over  and  under  Boston  streets, 
upon  railway,  telegraph,  telephone,  gas,  electric  light, 
steam  heating  companies,  etc.?  So  far  as  these  corpora- 
tions actually  own,  in  their  own  names  and  of  record,  offices 
and  buildings,  over  which  they  have  exclusive  control, 


ONE    TAX  ENOUGH.  155 

like  any  other  private  land-owner,  such  property  is 
assessed,  but  only  at  the  same  rate  per  square  foot  as 
other  private  land.  But  not  one  dollar  of  the  value  of 
the  franchises  of  any  of  these  corporations,  or  of  the  privi- 
leges which  they  have  over  and  under  Boston  streets,  is 
included  in  the  assessors'  estimate  of  land  value.  This 
will  appear  even  more  clearly  upon  examination  of  the 
assessors'  annual  reports.  Such  franchises  and  privileges 
are  never  assessed  under  the  head  of  "  land  "  in  any  State 
of  the  Union. 

No  doubt  the  Boston  assessors  and  Mr.  Atkinson  were 
astonished  at  the  suggestion,  made  some  years  ago,  that 
all  these  franchises  and  privileges  come  within  the  defini- 
tion of  "  land  ";  but  they  certainly  do,  both  under  the 
principles  of  economic  science  and  under  the  plain  terms 
of  American  law.  They  are  "hereditaments,"1  which 
form  a  part  of  "  land,"  under  both  Massachusetts2  and 
New  York  law3;  although  exempted  from  taxation  by 
statute  in  New  York,  and  by  the  "  dead  hand  "  of  Chief 
Justice  Shaw  in  Massachusetts.4  Applying  this  principle 
to  railroad,  telegraph,  gas,  and  other  corporate  privileges, 
in  or  over  the  streets  of  Boston,  there  can  be  no  doubt 
that  the  land  values  appertaining  to  these  franchises  would 
be  eagerly  bid  for  at  $3,000,000  per  annum.  The  whole 

1  Smith  v.  New  York,  68  N.  Y.,  552. 

2  Rev.  Slat.  ch.  3,  §  7. 

3  I  Rev.  Slat.,  750. 

4  This  famous  judge,  although  undoubtedly  honest,  made  some  of  the  worst 
decisions  in  favor  of  corporations,  which  can  be  found  in  judicial  history. 
He  invented  the  theory  under  which  masters  are  exempted  from  liability  to 
servants  for  the  negligence  of  co-servants.     And  he  declared  the  roadbed  of 
all  railroads  to  be  exempt  from  taxation,  because  the  roads  are  permitted  to 
acquire  land   under  the  power  of  "eminent   domain  "  as  for  a  public  use 
(Worcester  v.  Western  R.  R.  Co.,  4  Mete.,  564).    The  courts  of  New  York, 
and  probably  of  every  other  State,  have  treated  this  amazing  doctrine  as  hardly 
worthy  of  discussion. 


156  NATURAL    TAXATION. 

of  this  large  sum  is  entirely  omitted  from  the  official 
estimate  of  ground  rents  in  Boston  ;  and,  therefore,  at 
twenty  years'  purchase,  the  land  of  Boston  has  been 
undervalued  to  the  extent  of  $60,000,000. 

This  estimate  is  confirmed  by  the  census  of  1890,  which 
shows  that  the  real  values  of  real  estate,  including  these 
franchises,  were  nearly  30  per  cent,  higher  than  the 
assessed  values  in  Massachusetts.  The  official  figures  for 
Boston  alone  are  not  at  present  accessible ;  but  there  is 
every  reason  for  believing  that  the  undervaluation  there 
was  as  great  at  least  as  in  the  rest  of  the  State,  since  Bos- 
ton has  more  valuable  franchises  than  any  other  part  of 
the  State.  In  view  of  these  facts  let  us  revise  the  forego- 
ing table,  on  the  basis  of  an  addition  of  only  25  per  cent, 
instead  of  30. 

Boston  Ground  Rents  and  Taxes,  1888. 
Corrected  by  reference  to  Census. 

Ground  rent,  assessed  as  such $16,650,000 

Correction  of  under-assessment  per  census 4,162,000     $20,812,000 

Federal  taxes $  4,500,000 

Local  taxes 10,000,000 

$14,500,000 

Deduct   taxes   on   land  values  al- 
ready paid 4, 500,000 

Taxation  on  present  net  rents,  if  all 

other  taxes  are  repealed 10,000,000 

Surplus    rents $10,812,000 

The  concentration  of  all  taxation  upon  ground  rents, 
in  Boston,  would  not,  therefore,  absorb  as  much  as  48 
per  cent,  of  those  rents. 

§  12.  Summary.  All  the  foregoing  calculations  have 
been  made  without  any  preconceived  theory  as  to  the 
proportion  which  taxation  would  probably  bear  to  rent, 


ONE    TAX  ENOUGH. 

and  without  any  anticipation  that  there  would  be  much 
uniformity  in  the  results  obtained  from  such  widely  sep- 
arated and  widely  different  communities.  Let  us  now 
compare  these  results,  reckoning  the  British  pound 
at  $4.85. 


Net  Ground  Rent 
Less  Present  Tax. 

Additional      Proportion 
Tax.      Taken  by  Tax. 

$433,095,000          59  % 
616,748,000          ^\% 
63,784,000          45!  # 
8,217,000          44^  % 

IO.OOO.OOO             48  # 

United  States  

,  i  380  ooo  ooo 

Pennsylvania  

140  500  ooo 

Connecticut  

l8  dl^  OOO 

Boston.  . 

20.  812.000 

The  uniformity  of  result,  where  the  figures  are  based 
upon  the  same  census,  as  in  the  United  States  at  large, 
Pennsylvania,  and  Connecticut,  is  remarkable. 

In  Great  Britain  the  estimate  of  ground  rent  does  not 
allow  a  dollar  for  the  value  of  vacant  land  or  unoccupied 
houses,  parks  or  pleasure  grounds.  The  magnificent 
estate  of  Chatsworth  is  rated  at  only  $3000  per  annum. 
An  addition  of  one  third  to  the  values  included  above 
would  be  far  below  the  truth.  With  such  an  addition, 
the  proportion  of  taxes  to  British  rents  would  be  reduced 
below  44j  per  cent. 

All  attainable  statistics  thus  point  to  the  conclusion 
that  the  entire  cost  of  the  most  expensive  and  even  ex- 
travagant governments  in  civilized  countries  could  be 
placed  upon  ground  rents,  without  taking  in  taxation 
even  half  of  the  present  net  income  of  land-owners  from 
.that  source  alone. 

The  land-owning  reader  may  be  impatient  and  indig- 
nant with  this  cold  statement  of  a  result  which,  as  he  will 
think,  means  ruin  to  him.  But  he  must  remember  that 
this  chapter  is  devoted  to  the  single  inquiry :  "  Is  Rent 
enough  to  meet  Taxes?"  leaving  other  questions  for 


158  NATURAL    TAXATION. 

future  consideration.  In  a  later  part  of  this  book,  those 
other  questions  will  be  fairly  met  and  dealt  with. 

Anticipating,  however,  for  a  moment,  one  of  those 
important  questions,  let  it  be  observed  that  no  allowance 
has  been  made,  in  the  foregoing  figures,  for  the  undeni- 
able fact  that  the  land-owning  class  own  not  merely  the 
land  but  also  all  the  buildings  and  improvements  upon 
land,  besides  a  vastly  larger  share  of  personal  property 
than  any  other  class  of  the  cummunity.  Under  the  pres- 
ent system,  all  these  things  are  taxed.  Under  a  system 
of  natural  taxation,  none  of  them  would  be  taxed,  except 
the  value  of  the  land  alone.  It  will  presently  be  shown 
that  the  benefits  conferred  upon  nine  tenths  of  the  land- 
owning class,  by  the  release  of  all  their  other  property,  earn- 
ings and  expenses  from  taxation,  would  be  enormous. 
But  that  does  not  find  its  proper  place  in  this  chapter, 
which  has  to  do  with  no  other  inquiry  than  the  sufficiency 
of  ground  rents  to  supply  government  revenue. 

§  13.  Ground  rents  in  rural  districts.  Having 
analyzed  the  cases  of  large  cities  and  large  states,  fully 
settled  and  highly  civilized,  and  found  that  a  moderate 
tax  on  their  ground  rent  is  sufficient  for  all  their  needs, 
there  remain  for  consideration  villages,  small  towns,  and 
half  settled  states  or  territories  on  the  border  of  civiliza- 
tion. 

It  is  said,  with  great  confidence,  that  the  land  of  these 
communities  is  of  no  value,  and  therefore  that  a  tax  upon 
this  no-value  land  could  not  support  government  in  these 
districts.  Of  course,  if  the  assertion  is  true  the  argu- 
ment is  conclusive.  But  the  assertion  is  not  true  ;  and 
the  argument  would  apply  only  to  a  very  limited  district, 
even  if  it  were  based  upon  truth. 

No  one  lives  permanently,  within  the  real  dominion  of 
any  government,  on  land  which  has  no  value.  Robinson 


ONE    TAX  ENOUGH.  I  $9 

Crusoe,  living  alone,  occupied  land  which  was  of  great 
utility  to  him  ;  although  it  could  not  produce  economic 
"  value  "  (that  is,  value  in  exchange)  until  some  one  else 
came  upon  the  island.  But,  until  then,  he  had  no  gov- 
ernment. When  Friday  landed,  Robinson  formed  a  gov- 
ernment of  one  ;  and  economic  rent  or  land  value  began. 
The  price  which  Friday  was  glad  to  pay,  for  permission 
to  live  on  the  island,  was  his  rent ;  and  that  rent  was,  as 
we  all  know,  amply  sufficient  to  defray  all  the  expenses 
of  government.  Wherever  any  government  exists  it 
necessarily,  in  the  very  nature  of  things,  assumes  the 
ownership  of  all  land  within  its  limits ;  and  ground  rent 
at  once  begins.  Between  the  government  and  the  citizen 
any  land,  however  poor,  has  a  market  value.  The  citi- 
zen who  inflexibly  insists  that  it  has  not  is  invited  to  emi- 
grate, and  is  forced  to  give  place  to  some  one  who  has  a 
different  opinion. 

Although  it  is  ideally  conceivable  that  a  state  of  things 
might  exist  in  which  land  might  have  no  exchangeable 
value,  as  between  private  individuals,  no  one  has  ever 
known  that  state  of  things  to  exist,  where  even  a  hundred 
people  live  in  civilized  community  together;  and  such  a 
state  of  things,  as  between  any  government  and  any  per- 
son receiving  any  benefit  from  that  government  upon 
land  permanently  appropriated  by  him,  is  inconceivable. 

§  14.  Ground  rents  always  exceed  cost  of  govern- 
ment. Nor  can  the  average  annual  cost  of  necessary 
government  for  any  community  ever  be  greater  than 
the  average  annual  value  of  its  land.  To  say  that 
it  can,  is  a  contradiction  in  terms.  How  can  any 
government  be  necessary,  which  costs  more  than  the  priv- 
ilege of  living  under  it  is  worth  ?  And  what  is  the  cost 
of  the  privilege  of  living  in  any  particular  place,  except 
the  ground  rent  of  that  place  ?  It  makes  no  difference 


l6o  NATURAL    TAXATION. 

how  you  assess  the  price  of  the  privilege.  A  landlord 
can,  if  he  chooses,  fix  his  asking  price  for  rent  upon  a 
computation  of  his  tenant's  personal  property.  If  the 
price  thus  fixed  is  less  than  the  market  value  of  the  land, 
the  tenant  will  gladly  pay  it,  and  bless  the  stars  which 
gave  him  a  fool  for  a  landlord.  If  it  is  more,  the  tenant 
will  move  away,  and  the  landlord  will  get  nothing.  The 
state  can  do  no  more.  No  one  will  pay  more  taxes  than 
the  privilege  of  residing  within  the  jurisdiction  of  the 
state  is  worth.  If  any  one  pays  less,  he  is  better  off  than 
people  who  live  in  another  place  and  pay  full  value.  This 
difference  is  so  much  natural  rent ;  which  he  puts  into  his 
own  pocket  or  is  compelled  to  pay  to  a  private  landlord. 

Ground  rent,  therefore,  is  invariably  sufficient  to  meet 
all  the  expenses  of  necessary  government.  But  as  gov- 
ernment never  exists  where  society  does  not  exist,  and  as 
society  offers  many  advantages  in  addition  to  the  mere 
benefits  of  government,  the  privilege  of  living  in  society 
is  worth  much  more  than  the  mere  cost  of  government. 
This  privilege  is  dependent  upon  the  privilege  of  living 
within  a  tract  of  land  in  which  society  exists.  Outside 
of  such  land,  there  is  other  land,  with  no  society  and  no 
government.  The  difference  between  the  value  or  no- 
value  of  the  right  to  live  in  solitude  and  the  value  of  the 
right  to  live  in  society  is  so  much  economic  rent. 

Rent,  therefore,  will  at  all  times,  in  all  places  and  in  all 
circumstances,  exceed  the  entire  cost  of  necessary  govern- 
ment. 

§  15.  Proper  distribution  of  government  cost.  But 
a  great  central  government  finds  it  for  the  advantage  of 
the  whole  nation  to  maintain  much  more  complex  and 
expensive  government  in  places  like  Alaska,  Wyoming, 
and  Arizona,  than  is  really  needed  for  the  small  number 
of  people  actually  residing  there.  It  therefore  maintains 


ONE    TAX  ENOUGH.  l6l 

territorial  governments,  at  the  expense  of  the  more  ad- 
vanced States ;  not  because  Arizona  needs  so  much  gov- 
ernment, but  because  New  York,  Chicago,  and  St.  Louis 
need  to  have  new  countries  developed  faster  than  the  resi- 
dents of  those  territories  need  for  their  own  benefit. 

So  great  cities  need  costly  roads  through  little  villages, 
which  would  otherwise  be  satisfied  with  mule  tracks. 
Roads  ought  to  be  a  State  charge  ;  and  it  is  now  seen  that 
the  failure  to  treat  them  as  such  has  been  a  disastrous 
mistake.  The  consequence  of  leaving  roads  to  be  man- 
aged by  local  authorities  has  been  that  not  one  road  in  a 
hundred,  throughout  the  United  States,  is  properly  laid 
out  or  respectably  maintained.  The  governor  of  Pennsyl- 
vania, several  years  ago,  called  attention  to  this  notorious 
fact  and  suggested  that  roads  ought  to  be  taken  under  the 
control  of  the  State.  This  example  has  been  followed  by 
the  governors  of  New  York,  New  Jersey,  and  other  States. 

The  administration  of  justice  should  not  be  left  to  the 
control  or  the  charge  of  small  towns.  Court  houses  and 
jails  ought  to  be,  at  the  very  least,  a  county  charge,  if 
not  furnished  at  the  expense  and  under  the  supervision 
of  the  State.  The  State  cannot  afford  to  tolerate  injustice 
within  the  limits  of  any  township  ;  and  while  it  may  be 
that  all  these  matters  can  be  judiciously  left  to  the  con- 
trol of  large  districts,  like  a  county,  it  is  not  desirable 
that  they  should  be  intrusted  to  the  control  of  each  little 
township  for  itself.  Consequently,  the  expense  of  court 
houses  and  jails  should  be  provided  and  their  management 
should  be  controlled  by  counties,  if  not  by  the  whole 
State.  The  State  of  New  York  is  properly  taking  all 
lunatic  asylums  under  its  own  charge. 

For  similar  reasons  schools  should  be  maintained  at 
the  expense  and  under  the  control  of  large  districts.  It 
is  no  more  for  the  interest  of  the  State  of  New  York  to 


1 62  NATURAL    TAXATION. 

permit  ignorance  to  prevail  in  the  woods  of  Hamilton 
and  Ulster,  than  it  is  for  the  interest  of  the  United  States 
to  allow  robbery  to  flourish  unchecked  in  Arizona.  This 
is  not  a  mere  question  of  financial  ability.  There  are 
many  townships  which  have  abundant  means  to  provide 
for  the  proper  education  of  their  children,  which,  never- 
theless, have  but  little  interest  in  seeing  the  work  done, 
and  the  residents  of  which  are  in  fact  so  isolated  from  the 
rest  of  the  world  that  they  have  no  iMea  how  such  work 
should  be  done.  This  principle  is  partially  recognized  in 
New  York.  Public  schools  are  supported  by  State  appro- 
priations ;  although  they  are  not  controlled  by  the  State 
as  fully  as  they  should  be. 

The  expenses  of  government  will  in  the  future  more  and 
more  tend  to  centralization  in  counties,  if  not  in  States. 
Of  course  it  will  never  do  for  the  State  to  pay  the  bills, 
where  it  does  not  control  the  outlay.  Whatever  roads, 
courts,  jails,  or  schools  are  paid  for  by  the  State  should  be 
controlled  by  the  State  ;  otherwise  townships  which  would 
receive  all  the  benefit  of  expenditure  would  feel  no  direct 
interest  in  diminishing  its  burden. 

§  16.  Rent  sufficient,  when  burdens  just.  Now,  no 
one  seriously  maintains  that  the  ground  rent  of  any 
county  in  the  thickly  settled  parts  of  the  United  States 
is  not  amply  sufficient  to  defray  all  the  expenses  of  gov- 
ernment properly  chargeable  to  that  county,  exclusive  of 
federal  taxes  ;  and  no  one  can  successfully  claim  that  any 
State  east  of  the  Mississippi  River  is  so  poor  that  its 
ground  rent  would  not  suffice  to  defray  all  its  own  gov- 
ernment expenses,  as  well  as  the  proportion  of  federal 
taxation  which  would  fall  upon  it  under  the  existing  Fed- 
eral Constitution,  which  apportions  such  taxes  according 
to  population,  instead  of  according  to  wealth.  It  may 
be  claimed  that  some  of  the  very  new  and  thinly  settled 
States  could  not  bear  the  burden  of  federal  taxation  on 


ONE    TAX  ENOUGH. 


i63 


that  basis,  in  addition  to  their  own  expenses,  without 
trenching  upon  something  besides  ground  rent  ;  although, 
for  the  reasons  above  stated,  even  this  is  highly  improba- 
ble. It  is  quite  certain  that  when  taxation  is  adjusted, 
as  it  must  finally  be,  in  proportion  to  the  ground  rent  of 
every  State  and  county,  the  cost  of  government  will  not 
exceed,  nor  even  equal,  the  amount  of  such  rent  in  any 
county  of  the  United  States.  When  the  burden  of  main- 
taining government  is  apportioned,  as  it  also  must  be, 
between  States,  counties,  cities,  townships,  and  villages, 
in  such  manner  as  to  relieve  the  smaller  divisions  from 
burdens  which  do  not  properly  belong  to  them,  there  will 
no  longer  be  any  question  in  the  mind  of  any  reasonable 
man  as  to  the  sufficiency  of  ground  rent,  in  every  corner 
of  the  United  States,  to  bear  all  the  expenses  of  govern- 
ment, and  yet  to  leave  a  generous  margin.1 

1  The  statements  in  the  text  can  be  illustrated  by  reference  to  the  appro- 
priations for  town  purposes,  made  by  several  farming  towns  of  small  popula- 
tion in  Massachusetts  in  the  spring  of  1895.  With  each  town  is  given  the 
population  in  1890,  number  of  acres  assessed,  and  appropriations,  including 
highways,  paupers,  etc.,  and  schools. 

Berkshire  County. 


Town. 
Alford 

Acres. 
7172 

Popula- 
tion. 

297 
845 
1,739 
i,  018 

569 
412 

796 

884 

Hampden 

1,295 
831 

201 
266 

High- 
ways. 

$  400 
T,000 
1,  800 
I,I9O 
I,  GOO 
800 
I,5OO 
I,OOO 

County. 

2,400 
750 
400 

70O 

Schools. 
$  6OO 
1,000 
4,025 
I,7OO 
700 
950 
2,O5O 
1,500 

2,000 

1,825 
2OO 
600 

Total  Ap- 
Paupers,       propria- 
etc.                 tions. 

$1,075 
3,060 

$1,100         9,840 

I.OOO            7,O2O 
2,500 

2,715 
700            5,725 

3,ooo 

1,400         9,339 
600         3,960 

TOO             1,050 
2OO             I.  Gin 

Kgremont 

II   107 

Ilinsdale  

.    n  74.5 

Lanesboro' 

1  7  ^^2 

Savoy 

IQ  QI7 

Tyringham  .  .  . 

.  .  .  .    10  845 

Richmond 

1  1    32  1 

Clarksburg 

7  74.0 

Chester  

21   588 

Hampden 

1  1  7^2 

Holland  
Montgomery  . 

7,120 

8.*86 

Hampshire  County. 

Westhampton 15,282         477          1,000 

Total.. 


500 


3,100 


9,660     $13,940     $18,300     $5,600     $54,299 

These  statistics  are  taken  from  the  Springfield  Republican.     They  all  tell 


164  NATURAL    TAXATION. 

To  state  the  case  again  in  another  form,  the  whole 
matter  can  be  summed  up  by  saying  that  it  is  impossible 
that  any  government  can  be  necessary,  which  costs  more 
than  the  ground.rent  of  the  district  which  is  called  upon 
to  pay  for  it  ;  since  that  rent  will  always  represent,  to  the 
fullest  extent,  not  only  all  that  such  government  is  reason- 
ably worth  to  the  inhabitants  of  that  district,  but  also  the 
full  market  value  of  all  other  advantages  which  they 
derive  from  human  society,  as  it  actually  exists  among 
them.  Any  pretended  taxation  which  takes  more  from 
the  people  than  this  is  extortion,  not  genuine  taxation. 

the  same  story.  Highways  (including  bridges),  schools,  and  paupers  account 
for  two  thirds  to  three  fourths  of  all  local  expenses  in  these  little  townships. 

Taken  altogether,  highways  cost  26$,  schools  34^,  and  paupers  10$  of  all 
town  expenses  ;  making  70$  of  the  whole  expended  for  purposes  which 
ought  to  be  provided  for  by  State  taxation,  and  kept  under  State  control. 
In  New  York  schools  and  paupers  are  already  provided  for  by  a  general 
tax,  and  highways  soon  will  be. 

Observe  the  large  area  and  small  population  of  most  of  these  towns,  es- 
pecially Alford,  Savoy,  Tyringham,  Holland,  Montgomery,  and  Westhamp- 
ton,  which  are  devoted  almost  exclusively  to  farming,  and  where  there  are 
130  to  190  acres  for  each  family.  Is  it  reasonable  to  cast  the  whole  expense 
of  highways  through  this  large  territory  on  such  a  sparse  population  ?  Can 
we  wonder  that  country  roads  are  bad  ? 

Of  course  a  State  tax  would  be  levied  on  these  towns,  as  well  as  upon 
others.  But  they  would  pay  only  according  to  the  proportion  which  the 
value  of  their  ground  rents  bore  to  those  of  the  entire  State.  Their  gross 
taxes  would  be  reduced  by  at  least  50  per  cent. 

That  this  result  would  follow,  is  conclusively  shown  by  the  experience  of 
New  York.  While  all  counties  are  taxed,  for  State  purposes,  in  proportion 
to  the  value  of  their  real  estate  alone,  the  State  repays  to  every  one  of  the 
farming  counties  (being  40  out  of  the  entire  60),  for  school  purposes  alone, 
more  than  the  whole  county  contribution  to  the  State  tax.  And,  in  addition, 
the  State  provides  for  all  their  paupers  and  insane  free  of  county  charge. 

The  adoption  of  a  natural  and  rational  system  of  local  taxation,  combined 
with  a  proper  distribution  of  expenses,  would  thus  relieve  the  farming  popu- 
lation in  Massachusetts  from  one  half  of  their  present  burdens.  It  maybe 
safely  assumed  that  it  would  have  the  same  effect  in  other  commercial  or 
manufacturing  States. 


OF  TUB 

TJNIVERSI 


CHAPTER  XL 

JUSTICE  OF  NATURAL  TAXATION. 

§  I.  A  tax  on  taxation  only.  If  the  proposed 
method  of  taxation  is  not  just,  it  is  not  natural.  But  if 
it  is  natural,  -fHs"Just7~' 

To  state  the  case  is  to  demonstrate  the  justice  of  the 
tax.  For  what  is  here  proposed  is  simply  this  : 

To  tax  the  proceeds  of  taxation,  and  nothing  else. 

For  ground  rent  is  taxation,  and  nothing  else.  The 
power  to  collect  ground  rent  is  a  delegated  power  of 
taxation.  Can  anything  be  more  just  than  for  the  State 
to  draw  its  revenue  from  the  proceeds  of  such  taxation 
and  from  nothing  else  ? 

§  2.  Privilege  of  collection  implies  duty  of  pay- 
ment. The  duty  of  providing  for  the  whole  support  of 
government  is  indissolubly  attached  to  the  right  of  col- 
lecting ground  rent.  The  landlord,  as  the  only  natural 
tax-gatherer,  is  also  the  only  natural  revenue-provider. 
Every  man  who  buys  the  privilege  of  taxation  assumes, 
by  the  very  act,  a  proportionate  share  of  the  burden  of 
government  expenses.  No  lapse  of  time,  no  misconcep- 
tion of  the  situation,  no  unwise  or  excessive  payment  for 
the  privilege  can  ever  relieve  him  from  this  inherent  obli- 
gation. The  State  may  justly  resume  its  rights,  to  this 
extent,  at  any  moment,  even  if  it  has  left  them  in  abey- 
ance for  ages.  It  ought  not  to  demand  compensation  for 
the  past ;  because  in  the  United  States,  at  least,  the  past 

165 


1 66  NATURAL    TAXATION. 

misappropriation  of  these  taxes  has  taken  place  under  the 
eyes  and  with  the  free  consent  of  the  people.  But  nothing 
has  happened  which  deprives  the  State  of  a  perfect  right 
to  demand  performance  of  this  duty  for  the  future. 

The  case  would  be  entirely  clear  to  every  disinterested 
mind,  if  a  simple  power  of  levying  taxation  had  in  terms 
been  granted  to  a  private  citizen.  Thus,  if  the  State  of 
New  York  had  granted  to  the  first  Astor  and  his  heirs 
forever  the  right  to  exact  an  annual  poll  tax  of  one  dollar 
per  head  from  all  inhabitants  of  the  State,  either  without 
consideration  or  for  a  cash  payment  of  one  dollar  for  each 
inhabitant  then  living,  nobody  outside  of  the  Astor  family 
would  hesitate  about  the  matter.  Much  -less,  if  the 
State  had  granted  to  the  Astors  the  exclusive  right  to 
collect  for  their  own  use  all  the  taxes  which  should  ever 
be  levied  in  any  form  whatever,  would  there  be  any  doubt 
that  the  State  would  have  both  the  legal  and  moral  right 
to  require  the  Astors  to  pay,  out  of  the  proceeds,  all  the 
necessary  expenses  of  government.  No  judge  would 
hesitate  a  moment  to  say  that  such  a  condition  was  im- 
plied in  the  original  grant,  notwithstanding  any  words  to 
the  contrary  ;  or  else  he  would  hold  the  grant  utterly 
void,  as  beyond  the  power  of  any  legislature. 

Yet  this  is  exactly  a  parallel  case.  Nay,  it  is  not  too 
much  to  say  that  it  is  the  very  case  in  question.  The 
State,  in  parcelling  out  the  land  within  its  borders  among 
private  owners,  gave  to  them  the  whole  power  of  taxation 
which,  in  the  nature  of  things,  could  exist  at  the  founda- 
tion of  any  State.  For  in  any  newly  settled  country 
there  is  absolutely  nothing  to  tax,  except  the  rental  value 
of  the  land. 

§  3.  Illustrations  from  American  history.  Of  this 
fact,  there  have  been  repeated  illustrations  in  the  recent 
history  of  the  United  States.  Within  the  memory  of 


JUSTICE   OF  NATURAL    TAXATION.  l6/ 

most  living  electors,  Kansas,  Nebraska,  North  Dakota, 
South  Dakota,  Colorado,  Wyoming,  Idaho,  and  Oklahoma 
have  been  opened  for  the  first  time  to  settlement.  Prior 
to  that  time  it  was  not  lawful  for  any  white  man  to  take 
up  a  permanent  residence  within  their  limits ;  they  had 
no  local  government  and  no  taxes. 

When  such  a  territory  was  opened,  its  first  need  was  some 
government.  This  was,  as  a  matter  of  fact,  provided  by 
the  United  States,  which  were  only  partly  reimbursed  by 
taxation.  But  if  this  had  not  been  done,  what  would 
have  been  the  natural  course  of  events?  The  people 
would  have  organized  a  provisional  government,  as  they 
actually  did  in  California  in  1849.  There  were  no  houses, 
no  barns,  no  improvements,  no  mortgages,  no  personal 
property  fixed  long  enough  in  any  one  spot  to  be  capable 
of  assessment.  What  was  there  which  could  possibly 
have  been  taxed  in  the  first  week  of  territorial  existence? 
Nothing,  except  the  value  of  the  land.  Was  that  sufficient  ? 
Let  the  experience  of  Oklahoma  answer.  Scores  of  thou- 
sands of  people  swarmed  to  the  border,  kept  out  by  gov- 
ernment rifles  until  the  hour  struck  at  which  they  were 
allowed  to  enter.  Then  they  rushed  in  at  full  speed,  tear- 
ing their  way  like  mad  bulls — where?  To  the  land  offices ; 
where  they  could  purchase  for  a  trifling  sum  the  legal 
right  to  tax  those  who  fell  behind  in  the  race.  What 
was  there  then  to  tax?  Nothing  but  the  privilege  of 
living  on  the  best  tracts  of  land.  Not  the  farming  dis- 
tricts, but  the  town  lots  were  the  prizes  in  view.  These 
were  what  the  federal  officials  seized  for  themselves. 
These  were  the  rewards  which  tempted  men  to  perjury 
and  fraud,  as  well  as  to  zeal  and  long  self-denial. 

And  what  did  the  government  find  to  tax  at  that 
moment  ?  No  houses  ;  no  chattels ;  nothing  but  the 
privilege  of  settling  upon  the  land  ;  and  from  this  it 


1 68  NATURAL    TAXATION. 

derived  an  immediate  and  large  revenue  ;  although  it 
threw  away  nine  tenths  of  what  it  might  have  received,  to 
be  scrambled  for  by  the  owners  of  fast  horses  and  by  its 
own  knavish  servants,  leaving  the  honest  mass  of  settlers 
to  pay  tribute  to  the  favored  few,  who  swore  that  they 
meant  to  settle  on  the  land,  and  knew  that  they  were 
swearing  to  a  lie.  All  the  powers  of  local  government 
were  then  turned  over  to  the  few  thousand  voters,  who 
thus  gained  possesssion  of  the  land,  either  direct  from  the 
federal  government,  for  nothing,  or  from  those  who  had 
forestalled  them  by  speed  or  fraud,  for  a  price.  Still 
there  was  practically  nothing  to  tax,  except  land  values. 
The  annual  ground  rents  were  amply  sufficient  to  pay  all 
the  cost  of  government.  But  in  the  course  of  a  year  or 
two,  other  settlers  drifted  in.  The  landowners,  being  still 
in  the  majority,  not  only  exacted  in  rent  from  the  new- 
comers the  full  market  value  of  the  privilege  of  living  in 
the  territory,  but  further  proceeded  to  shift  as  much  of 
the  burden  of  taxation  from  their  own  shoulders  as  they 
possibly  could,  by  taxing  personal  property. 

Now  is  this  the  natural  and  sensible  method  of  opening 
new  territory  ?  Is  there  not  a  better  way  ?  Would  not 
common  sense  and  science  agree  that  the  true  policy  of 
the  nation  would  have  been  to  say  to  all  the  proposing  set- 
tlers :  "  Take  this  land.  Charge  what  you  please  to  new 
settlers,  who  wish  to  buy  of  you  the  privilege  of  living 
there.  But  out  of  the  sums  thus  collected  you  must  pay 
all  the  expenses  of  government,  local  and  national.  You 
shall  not  make  your  tenants  pay  the  cost  of  government, 
in  addition  to  the  rent  which  they  pay  you  for  the  mere 
privilege  of  living  on  the  land  which  has  been  given  you 
free  of  charge."  Clearly,  if  there  is  anything  unfair  in 
such  an  arrangement,  it  is  not  unfair  to  the  gratuitous 
grantees  of  the  land. 


JUSTICE   OF  NATURAL    TAXATION.  169 

§  4.  "  Confiscation."  It  will  be  said,  of  course,  that 
this  method  of  taxation  is  mere  "  confiscation  "  ;  and,  to 
the  minds  of  many,  this  will  be  a  conclusive  objection.  It 
is  to  be  regretted  that  the  brilliant  author  of  Progress 
and  Poverty  should  have  even  once  used  this  word  ;  thus 
seeming  to  identify  the  cause  of  equal  taxation  with 
apparent  robbery  and  to  confound  justice  with  injustice. 
Although  such  may  not  have  been  its  original  meaning, 
yet  by  long  usage  "  confiscation"  is  understood  to  mean 
a  punishment  for  crime  or  moral  incapacity.  We  are  not 
at  liberty  to  confiscate,  in  this  sense,  either  land  or  its 
rent. 

But  no  question  of  confiscation  arises  in  the  case.  If  all 
the  land  belongs  to  all  the  people,  if  past  generations  had 
no  power  to  alienate  it  from  the  control  of  the  present,  if 
its  rent  is  now  wrongfully  withheld  from  the  people,  their 
taking  the  whole  of  it  would  be  merely  a  just  resumption 
of  their  own,  not  confiscation.  And  this  is  all  which 
Henry  George  ever  meant ;  as  page  after  page  of  his 
book  clearly  shows.  It  is  not  necessary,  however,  to 
discuss  that  question  here.  We  are  not  inquiring  into  the 
wrongs  of  the  past  or  even  into  the  general  rights  of  the 
people  in  the  present.  We  are  considering  only  the 
proper  method  of  raising  necessary  revenue. 
'  §  5-  "  Class  legislation."  The  only  pretence  for 
charging  that  this  method  is  a  measure  of  confiscation  is 
founded  upon  the  allegation  that  it  is  unjust  to  put  the 
whole  burden  of  taxation  upon  a  single  class.  In  the 
light  of  past  history,  during  which  the  owners  of  land 
have  used  all  their  powers,  with  immense  success,  to  get 
rid  of  all  taxes  upon  themselves  and  to  cast  the  whole 
burden  upon  the  landless  poor,  their  present  remon- 
strances, sometimes  pathetic,  sometimes  ferocious,  against 
a  reversal  of  their  methods,  are  highly  entertaining. 


NATURAL    TAXATION. 

Every  tariff  duty,  every  excise  tax,  every  indirect  tax 
bears  witness  to  the  persistent  ingenuity  with  which  the 
collectors  of  rent,  the  natural  tax,  have  shifted  the  bur- 
dens of  public  taxation  upon  other  shoulders.  Not  one 
dollar  of  our  vast  federal  revenue  is  collected  from  rent. 
Nine  tenths  of  it  is  collected  from  the  comparatively 
poor.  Great  Britain  has  been  hitherto  governed  by  large 
landlords :  America  by  small  ones.  Both  alike  have 
evaded  the  taxation  of  rent  as  much  as  possible.  Both 
alike  have  never  hesitated  to  ruin  vast  numbers  of  their 
fellow  citizens,  by  sudden,  arbitrary  and  disastrous 
changes  in  methods  of  taxation.  Both  alike  have  never 
dreamed  of  allowing  the  smallest  compensation  to  the 
victims  of  their  caprice.  But,  as  only  great  landlords  can 
make  a  profit  out  of  such  methods,  British  landlords  have 
made  themselves  wealthy  in  this  way  ;  while  the  mass  of 
American  land-owners  have  plundered  themselves  for  the 
benefit  of  a  few. 

§  6.  Compensation.  There  is  no  precedent  for  the  doc- 
trine that  taxation  must  be  spread  over  the  whole  com- 
munity, and  still  less  for  the  povel  claim  that  the  State  is 
bound  to  compensate  taxpayers  for  the  payment  of  taxes. 
When  will  any  congress  compensate  Americans  whose 
property  was  destroyed  by  changes  in  the  tariff? 

Originally,  all  land  was  granted  by  the  State  upon  the 
express  or  clearly  implied  condition  that  the  grantee 
should  provide  for  all  the  expenses  of  government.  The 
land-owners  gradually  shifted  the  burden  off  their  own 
shoulders,  by  new  taxes  on  the  non-voting  population. 
But  even  they  had  not  the  audacity  to  make  a  perpetual 
covenant  between  themselves  and  the  government  which 
they  controlled,  for  exemption  from  taxation.  The 
plea  of  their  successors  is  that,  by  long  failure  on  the  part 
of  the  people  to  demand  their  rights  and  the  performance 


JUSTICE   OF  NATURAL    TAXATION.  I/I 

of  the  conditions  upon  which  the  land  was  granted,  land- 
lords have  been  led  to  believe  that  such  a  demand  would 
never  be  made  ;  that  many  of  them  have  paid  large  prices 
for  the  privilege  of  charging  rent,  in  the  belief  that  rent 
would  never  be  taxed  ;  and  that  it  is  unjust  for  the  State 
to  change  its  policy  in  this  respect,  without  giving  to 
them  as  much  with  one  hand  as  it  takes  from  them  with 
the  other. 

The  argument  is  just  as  valid  in  favor  of  kings  and 
nobles ;  and  it  has  been  urged  upon  their  behalf  with 
equal  sincerity.  Down  to  1788  French  nobles  were  ex- 
empt from  most  taxes.  Many  men  (like  Beaumarchais) 
bought  a  title,  partly  for  the  sake  of  this  exemption. 
The  French  Revolution  swept  away  all  these  privileges, 
without  a  shred  of  compensation  ;  and  all  the  world  now 
says  that  this  was  perfectly  right.  But  to  an  army  of 
tax-eaters  in  those  days  it  seemed  monstrously  wrong. 
The  parallel  is  complete. 

§  7.  Compensation  for  vested  rights.  The  concen- 
tration of  all  taxes  upon  ground  rents,  if  enacted  at  the 
foundation  of  a  state,  would  obviously  be  simple  justice. 
Why  is  it  not  equally  just  at  any  later  period  ?  "  Be- 
cause," it  is  said,  "  there  have  been  many  changes  of 
ownership  :  vested  rights  have  sprung  up :  new  men  have 
bought  the  land  from  the  original  owners,  paying  a  much 
larger  price  than  they  would  have  paid  if  it  had  been 
understood  that  rent  would  be  taxed.  Heavy  taxation 
will  destroy  the  market  value  of  the  land  ;  and  this  would 
be  robbery  under  the  forms  of  law." 

What  is  this  land  value,  which  is  so  sacred  that  it  must 
not  be  heavily  taxed  ?  Nothing  in  the  world  except  the 
value  of  a  power,  conferred  upon  individuals,  to  tax  other 
individuals  for  the  privilege  of  standing  upon  the  earth. 
It  is  the  only  kind  of  property  which  cost  the  original 


1/2  NATURAL    TAXATION. 

owner  nothing,  in  either  wealth  or  labor.  Every  other 
form  of  property  was  called  into  being  by  honest  human 
skill  and  labor,  and  was  therefore  fully  paid  for.  Property 
in  ground  rents  was,  in  every  instance,  originally  acquired 
either  by  undertaking  to  bear  the  cost  of  government,  as 
in  feudal  times,  or  by  gift  or  theft,  just"  as  we  have  seen 
it  acquired  in  Oklahoma.  No  doubt,  thousands  sacrificed 
much,  in  the  pursuit  of  Oklahoma  land,  by  hanging  on  the 
borders  of  the  territory  for  weeks,  waiting  for  the  day 
upon  which  the  gift  was  to  be  made.  But  by  doing  so 
they  no  more  gave  value  for  the  land,  than  beggars  give 
value  for  what  they  get,  by  standing  hat  in  hand  all  day 
long. 

It  is  true  that  this  power  to  levy  taxes  upon  other  men 
has  been  sold,  over  and  over  again,  at  increasing  prices, 
and  is  now  generally  held  by  men  who  paid  something  of 
value  for  it.  But  what  of  that  ?  The  State  never  pledged 
itself  to  exempt  this  privilege  from  taxation,  or  to  limit 
the  amount  to  which  it  will  be  taken  for  public  pur- 
poses ;  and  no  legislature  has  any  moral  right  to  do  so. 
The  present  owners  of  the  taxing  power  have  bought  upon 
a  speculation,  and  must  take  all  the  chances  of  speculation. 
Among  those  chances  is  the  possibility  that  the  State  may 
call  for  no  part  of  the  tax  collected  under  the  name  of  rent, 
and,  on  the  other  hand,  the  possibility  that  it  may  call  for 
nearly  the  whole  of  it.  All  other  forms  of  property  are 
bought  on  a  similar  speculation. 

Iron,  steel,  glass,  crockery,  tin  plates,  buttons,  laces, 
whisky,  apples,  eggs,  horses,  cattle,  mortgage  bonds,  bank 
stocks,  railway  shares,  and  hundreds  of  other  things  are 
bought  and  sold,  with  full  knowledge  that  there  may  be 
sudden  and  vast  changes  in  the  rates  of  taxation  upon 
them,  made  without  notice,  without  the  slightest  scruple, 
and  without  even  a  thought  of  compensation  to  the  many 


JUSTICE   OF  NATURAL    TAXATION.  173 

who  suffer  thereby.  The  tax  on  whisky  was  suddenly 
raised  to  50  cents,  then  to  $i,  then  to  $2,  then  reduced  to 
50  cents,  then  raised  again  to  90,  and  all  without  the  slight- 
est compensation  to  anybody.  The  tariff  taxes  were  sud- 
denly increased  50  per  cent,  all  around,  in  1864,  in  one 
night,  without  notice  and  without  a  dream  of  compensa- 
tion. 

Why,  then,  this  amazing  and  unexampled  tenderness  for 
speculators  in  the  privilege  of  taxing  their  fellow  men? 
The  answer  is  easy.  Most  of  the  losses  arising  from  in- 
crease in  other  forms  of  taxation  fall  upon  the  masses  of 
comparatively  poor,  because  the  burden  of  such  taxes  is 
shifted  upon  them.  None  of  the  loss  arising  from  an  in- 
crease of  taxation  upon  ground  rents  would  fall  upon  the 
poor ;  because  that  burden  cannot  be  shifted  upon  any- 
body. It  is  the  old,  old  story.  The  right  of  the  rich  to  plun- 
der the  poor  is  a  vested  right,  sacred,  even  in  the  eyes  of 
the  poor  themselves,  through  long  training  in  abject  ser- 
vility. 


CHAPTER  XII. 

WHERE  THE  BURDEN  FALLS. 

§  I.  Incidence  of  taxation.  No  matter  how  neces- 
sary or  beneficial  it  may  be,  taxation  must  always  cast  a 
burden  upon  some  one.  No  matter  how  justly  this  bur- 
den may  be  distributed,  it  still  falls  somewhere ;  and  it  is 
necessary  that  we  should  know  where  it  falls.  The  great 
change  from  unnatural  and  unjust  taxation  to  natural  and 
just  taxation  cannot  be  made  without  increasing  the  bur- 
dens of  some  classes  ;  and  every  class  will  properly  insist 
upon  knowing  how  its  interests  will  be  affected.  Let  us 
therefore  now  inquire  upon  what  classes  the  burden  will 
be  increased,  and  upon  what  classes  it  will  be  diminished. 
Or,  in  technical  language,  what  will  be  the  "  incidence  " 
of  natural  taxation  ? 

It  must  never  be  forgotten,  however,  that  the  burdens 
of  natural  and  of  unnatural  taxation  are  not  the  same. 
It  has  long  ago  been  explained  that  the  burdens  imposed 
by  the  clumsy  and  corrupting  methods  of  taxation,  now 
in  force,  are  twice  or  thrice  as  heavy  as  would  be  the 
necessary  burdens  of  a  natural  system.  But,  as  readers 
are  sure  to  forget  this,  their  attention  will  be  recalled  to 
it  more  fully  at  a  later  stage,  when  some  results  will 
appear  which,  for  want  of  bearing  this  in  mind,  will  seem 
at  first  incredible. 

In  the  United  States,  the  three  principal  classes  for 
consideration  are  wage-earners,  farmers,  and  other  land- 
owners. To  some  extent  these  different  classes  mingle 
together.  But  only  a  small  minority  of  farmers  work  for 


WHERE    THE  BURDEN  FALLS.  1/5 

wages  (for  of  course  farm  laborers  are  not  included  under 
the  head  of  farmers)  ;  and  a  vast  majority  of  wage-earners 
own  either  no  land  or  so  little  as  to  have  no  effect  upon 
their  interest  in  this  question. 

A  division  of  the  people  into  these  classes,  however, 
would  be  very  incomplete.  There  is  a  considerable  num- 
ber of  persons  who  do  not  work  for  mere  daily  wages  or 
on  farms  and  who  own  no  land.  The  correct  division 
would  be  into  two  classes,  the  land-owning  and  the  land- 
less. But  American  traditions  so  closely  identify  farmers 
with  land-owners  that  farmers,  whether  owning  or  hiring 
farms,  must  be  set  apart  as  a  class  by  themselves,  in  any 
popular  discussion  of  these  subjects.  The  most  conveni- 
ent arrangement,  therefore,  for  practical  purposes,  seems 
to  be  to  consider  the  interests  of  the  people  in  three 
classes,  not  scientifically  distinct,  as  follows  : 

1.  The  landless  class. 

2.  The  land-owners. 

3.  The  farmers,  whether  owning  or  hiring  land. 

§  2.  Relative  numbers  of  different  classes.  The  rela- 
tive proportions  of  these  classes  were  ascertained,  for  the 
first  time,  by  the  census  of  1890. 

The  whole  number  of  families  was 12,690,152 

Families  on  farms 4,767,179 

Other  families 7,922,973  12,690,152 

Families  owning  land 6,066,417 

Families  owning  none 6,623,735  12,690,152 

Owners  of  unincumbered  land 4,369,527 

Owners  of  incumbered  land .  1,696,890 

Owners  of  no  land. 6,623,735  12,690,152 

Families  owning  land,  free  and  clear 4,369,527 

Families  hiring  or  mortgaged 8,320,625  12,690,152 

Male  owners 5,019,659 

Female  owners ...1,046,758  6,066,417 

Male  tenants 5,837,590 

Female  tenants 786,145  6,623,735  12^690,152 


NATURAL    TAXATION. 


It  is  interesting  to  note  the  relative  proportions  in  rural 
and  urban  districts.  The  census  gives  the  figures  separ- 
ately for  farms,  for  towns  of  8,000  to  100,000  inhabitants, 
and  for  cities  of  over  100,000.  From  these  figures  an  ap- 
proximately correct  table  may  be  framed,  under  the  heads 
of  farms,  villages,  large  towns,  and  cities,  as  follows: 


Land-owners. 

Landless. 

Total. 

Farms 

o  142  74.6 

I  624  4^^ 

4767   I7O 

Villages  

i  840  700 

2  ^74.  860 

4224  ^60 

Towns 

620  OQ2 

I   I2O  487 

Cities  

4.44  87Q 

I    ^O^  Qi\H 

1   O48  8^4 

Total  

6,066,417 

6  62*3  71^ 

12  690  152 

The  number  of  adult  male  persons  in  the  United  States, 
in  1890,  was  returned  at  16,940,311. 

The  numbers  "  engaged  in  gainful  occupations  " — in 
other  words,  earning  their  own  living — was  returned  at 
22,736,229;  of  whom  19,321,700  were  over  20  years  of  age. 

These  figures  show  that  more  than  half  the  heads  of 
families,  more  than  two  thirds  of  the  adult  males,  and 
over  70  per  cent,  of  the  persons  earning  their  own  living, 
belonged,  in  1890,  to  the  landless  class. 

As  practically  all  adult  males  are  possible  voters,  it  thus 
appears  that  more  than  two  thirds  of  thevoters  are  landless. 

Confining  our  views  to  the  white  voters,  it  appears  that 
the  number  of  white  adult  males  was  15,199,856,  while 
the  number  of  white  males  owning  the  homes  or  farms 
in  which  they  lived  was  4,800,799.  The  landless  whites, 
therefore,  compose  two  thirds  of  the  white  voters. 

The  possible  colored  voters  numbered  1,740,455.  Of 
these  only  2 18,860  owned  homes  or  farms,  being  almost 
exactly  one  eighth  of  the  whole,  and  leaving  seven  eighths 
in  the  landless  class. 


WHERE    THE  BURDEN  FALLS.  I?? 

§  3.  The  landless.  The  immense  advantage  which 
would  be  gained  by  the  landless  class,  through  the  aboli- 
tion of  all  taxes,  except  upon  ground  rents,  is  of  course 
obvious.  It  would  relieve  them  from  all  the  taxes  which 
they  now  pay,  together  with  all  the  burdens,  incidentally 
resulting  from  the  present  methods  of  taxation,  which 
now  fall  upon  them.  They  would  continue  to  pay  rent ; 
but,  while  they  now  pay  both  rent  and  taxes,  they  would 
then  pay  rent  alone. 

Nine  tenths  of  the  absolutely  landless  persons  belong 
to  what  is,  for  want  of  a  better  name,  usually  called  the 
laboring  class.  The  abolition  of  all  indirect  taxation,  it 
has  already  been  shown,  would  increase  the  possible  sav- 
ings of  this  class,  fivefold  (Ante,  pp.  36, 37).  Nothing  need 
be  added  to  what  has  been  said  on  that  subject. 

The  landless  class,  as  will  be  seen  by  reference  to  the 
figures  last  given,  constitutes  more  than  half  of  the  fami- 
lies and  more  than  two  thirds  of  the  self-supporting  popu- 
lation. It  includes  a  majority  of  the  voters,  even  upon 
farms,  two  thirds  of  the  voters  in  villages,  three  fourths 
of  the  voters  in  large  towns,  and  nearly,  if  not  quite, 
seven  eighths  of  the  voters  in  cities. 

§  4.  The  land-owners.  It  has  already  been  shown 
that  the  concentration  of  all  American  taxes  upon  Ameri- 
can land-owners  would  not  absorb  half  of  their  ground 
rents.  But  it  would  be  a  great  mistake  to  assume  that 
such  taxation  would  absorb  half  of  their  whole  income,  or 
anything  approaching  to  it.  No  allowance  has  thus  far 
been  made  for  the  important  fact  that,  considered  as  an 
entire  class,  the  owners  of  ground  rents  also  own  all  the 
buildings  and  other  improvements  upon  their  land,  besides 
a  much  larger  share  of  all  personal  property,  in  propor- 
tion to  their  number,  than  any  other  class  of  the  commu- 
nity. All  these  things  would  be  relieved  from  taxation 


178  NATURAL    TAXATION. 

under  the  system  here  proposed.  All  taxes  on  real  estate 
and  probably  75  per.  cent,  of  the  taxes  on  personal  prop- 
erty are  paid  by  land-owners.1  They  also  pay  at  least 
their  full  share,  in  proportion  to  their  numbers,  of  tariff 
and  excise  taxes,  and  of  the  burdens  which  indirectly  flow 
from  those  taxes.  As  American  land-owners  constituted 
48  per  cent,  of  the  heads  of  families  in  1890,  they  will  be 
released  from  48  per  cent,  of  those  burdens,  the  amount 
of  which  was  estimated,  on  a  previous  page,  at  $1,050,- 
000,000  per  annum. 

The  local  taxes  on  both  real  and  personal  property  in 
1890  amounted  to  $470,652,000.  As  real  property  con- 
stituted three  fourths  of  all  assessed  values,  its  owners 
paid  three  .fourths  of  these  taxes  ($352,989,000),  three 
fourths  of  the  taxes  on  personal  property  ($88,248,000), 
and  48  per  cent,  of  the  $1,050,000,000  burden,  created  by 
federal  indirect  taxation  ($504,000,000).  These  were  the 
burdens  borne  by  real-estate  owners,  as  a  class,  in  1890: 
all  of  which  would,  under  the  taxation  of  ground  rents 
alone,  be  replaced  by  a  single  tax  of  $828,541,000. 

The  effect  of  such  a  change  in  taxation,  upon  American 
owners  of  real  estate,  taken  as  an  entire  class,  would  be 
as  follows  : 

American  real-estate  owners  paid,  in  1890,  under  the 
present  system  of  taxation  : 

All  local  taxes  on  real  estate $352,989,000 

75  per  cent,  of  local  taxes  on  personal  estate.  88,248,000 
48  per  cent,  of  federal  taxes  and  burdens  at- 
tendant thereon 504,000,000     $945,237,000 


They  would   pay,  if  all  taxes   were  concen- 
trated on  ground  rents  : 

All  local  taxes $470,652,000 

All  federal  taxes 357,889,000       828,541,000 

Net  reduction  of  burdens  on  real  estate $116,696,000 

1  Not  more  than  one  tenth  of  the  persons  who  are  not  assessed  for  some  land 
are  ever  assessed  for  any  personal  property,  taking  the  whole  country 
together. 


WHERE    THE  BURDEN  FALLS.  1 79 

§  5.  An  apparent  impossibility  explained.  This  con- 
clusion will,  at  first  sight,  seem  impossible  and  perhaps, 
absurd.  "  What !  "  the  incredulous  reader  will  exclaim  ; 
"  do  you  expect  us  to  believe  that  the  concentration  of 
all  taxes  upon  real  estate,  whether  including  improve- 
ments or  not,  can  possibly  reduce  the  burdens  of  real 
estate  owners  ?  The  very  idea  is  repugnant  to  common 
sense." 

Nevertheless,  the  idea  is  well  within  the  range  of  com- 
mon sense.  The  hasty  reader  has  forgotten  that  indirect 
taxes  always  involve  enormous  burdens  in  their  train,  not 
known  as  taxes,  not  collected  for  public  use,  not  capable 
of  accurate  computation,  but  none  the  less  real  and  heavy. 
These  incidental  burdens  have  been  estimated,  throughout 
this  book,  at  $700,000,000  per  annum.  They  include  a 
large  private  profit,  through  enhanced  prices,  maintained 
by  tariffs  and  excise  laws  ;  and  they  also  include  a  sum, 
quite  as  large,  absolutely  wasted,  by  keeping  up  prices  on 
goods  which,  after  all,  do  not  afford  an  average  profit  to 
domestic  producers.  Land-owners  as  land-owners  do  not 
get  the  profit,  and  nobody  gains  by  the  waste. 

No  doubt  a  small  section  of  the  land-owning  class  do 
get  a  large  share  of  the  profits  arising  from  the  monopo- 
lies fostered  by  protective  tariffs  and  excise  taxes.  But 
more  than  nine  tenths  of  the  land-owners  derive  no  bene- 
fit from  these  monopolies.  All  of  them  must  pay  their 
proportion  of  the  taxes  and  private  tribute,  levied  by  laws 
creating  monopolies  ;  but  the  profit  accruing  goes  to  those 
who  can  run  the  monopolies,  whether  they  own  or  only 
hire  land. 

Direct  taxation  would  put  an  end  to  all  such  monopolis- 
tic profits  and  all  the  indirect  effects  of  indirect  taxation. 
Owners  of  land,  who  did  not  hold  any  share  in  tariff-bred 
or  similar  monopolies,  would  save,  by  substituting  direct 


l8o  NATURAL    TAXATION. 

for  indirect  taxation,  their  share  of  the  $700,000,000  an- 
nually lost  to  the  people  at  large  in  this  way.  And  this 
saving  more  than  outweighs  all  the  additional  taxation 
falling  upon  them,  through  the  exemption  of  labor  and 
personal  property  from  taxes. 

Another  reason  is  of  even  greater  importance,  and  clears 
up  the  whole  apparent  mystery.  These  statistics  show 
that,  if  all  the  land  were  owned  by  a  class,  on  perfectly 
equal  terms,  in  equal  shares,  they  would  #//gain  by  direct 
taxation.  But  they  do  not  stand  on  an  equal  footing  or 
own  equal  shares.  On  the  contrary,  it  is  now  undisputed 
that  more  than  75  per  cent,  in  value  of  all  American  real 
estate,  including  railways,  is  owned  by  less  than  10  per  cent. 
of  the  whole  number  of  land-owners.  Indeed,  it  is  prac- 
tically undisputed  that  this  amount  is  held  by  less  than 
5  per  cent,  of  the  whole  number,  and  that  half  of  all  the 
value  is  held  by  one-hundredth  of  all  owners. 

This  fact  immediately  puts  a  new  light  upon  the  whole 
question.  Accepting  the  far  too  conservative  estimate 
that  one  tenth  of  all  the  owners,  or  600,000  families,  own 
three  fourths  of  all  the  land,  and  constructing  a  table, 
showing  the  effect  of  the  change  in  taxation  upon  them, 
we  should  reach  very  different  results. 

These  families,  being  much  richer  than  the  remain- 
ing 5,500,000,  of  course  pay  even  now  a  much  larger 
share  of  taxes  of  all  kinds.  Owning  three  fourths  of  all 
real  estate,  they  must  now  pay  three  fourths  of  the  taxes 
on  that,  or,  in  round  numbers,  $264,000,000.  They  doubt- 
less pay  one  fourth  of  all  personal  taxes,  or  $29,000,000. 
Their  quota  of  federal  taxes,  etc.,  would  be  very  much 
larger  than  that  of  the  same  number  of  small  land-owners. 
It  would  not  be  less  than  $200,000,000.  On  the  other 
hand,  this  class  includes  nearly  all  those  persons  who  de- 
rive profit  from  tariffs,  monopolies,  and  bounties  ;  all  of 


WHERE    THE  BURDEN  FALLS.  l8l 

which  would  be  swept  away  by  a  natural  system  of  taxa- 
tion. This  class,  as  a  whole,  would  suffer  some  loss. 

§  6.  Where  the  burden  would  fall.  But  the  line  must 
be  drawn  still  higher  up.  The  profits  of  artificial  monopo- 
lies and  bounties  are  almost  entirely  divided  among  less 
than  50,000  land-owners.  The  remaining  6,000,000  get 
practically  none  of  these  profits.  The  line  of  division, 
therefore,  must  be  drawn  between  the  50,000  families, 
which  own  at  least  30  per  cent,  of  all  the  land  values  of 
the  United  States,  and  the  6,000,000,  who  own  the  re- 
mainder. 

Allowing  one  half  the  burdens,  indirectly  resulting 
from  tariffs  and  excise  laws,  to  be  mere  waste,  bringing  no 
profit  to  anybody,  still,  in  years  of  average  prosperity, 
annual  profits  to  the  amount  of  $350,000,000  would  re- 
main ;  of  which  more  than  $300,000,000  go  to  the  50,000 
largest  land-owners. 

Let  us  now  construct  a  table,  showing  the  incidence  of 
direct  taxation  upon 

The  jf  0,000  largest  land-owners. 

They  paid,  in  1890  : 

30$  of  taxes  on  real  estate $106,000,000 

10$  of    "       "      personal  estate 11,700,000 

10$  of  tariff,  etc.,  taxes,  profits,  and 

waste 105,000,000          $222,700,000 


They  gained  profits  from  the  tariff,  etc 300,000,000 

Their  net  profits  from  the  system  of  indirect  taxation 

were 77,300,000 

Under   direct    taxation,    they   would   make  no   tariff 

profits,  and  would  pay  30$  of  all  taxes 249,000,000 

Their  net  loss,  from  direct  taxation $326,300,000 

This  explanation  makes  it  easy  to  understand  how  the 
vast  majority  of  land-owners  may  actually  gain  by  assum- 


1 82  NATURAL    TAXATION. 

ing  the  whole  burden  of  direct  taxation.  By  so  doing, 
they  get  rid  of  paying  a  tribute  of  $350,000,000  to  a  small 
band  of  bounty-fed  capitalists,  and  of  an  annual  waste  of 
$350,000,000  more.  The  loss  of  this  tribute  will  fall  en- 
tirely upon  the  few  who  depend  upon  unjust  legislation 
for  their  profits. 

But  the  case,  even  of  the  afflicted  50,000,  is  not  so  bad 
as  it  at  first  seems.  Let  us  review  their  whole  situation. 
Possessing  30  percent,  of  all  real-estate  values,  they  enjoy 
an  annual  rent,  from  land  and  building,  of  close  upon 
$700,000,000.  Their  income  from  tariff  profits  and  the 
like  has  been  put  at  $300,000,000.  They  would  lose  by 
the  adoption  of  direct  taxation  only  three  per  cen-t.  of 
their  rents ;  although  they  would  lose,  and  ought  to  lose, 
the  whole  of  the  tribute  which  they  levy  upon  their  fellow 
citizens,  by  means  of  an  abuse  of  the  taxing  power.  The 
immense  benefits  which  would  be  conferred  upon  the 
country,  by  the  abolition  of  indirect  taxation,  would  cer- 
tainly increase  rent  by  much  more  than  three  per  cent.; 
and  thus  even  this  small  class  would  lose  nothing  but  the 
illegitimate  profits,  which  they  make  by  an  abuse  of  the 
taxing  powers  of  the  national  government. 

Yet  there  must  be  some  class  which  will  lose  absolutely 
by  the  concentration  of  taxes  upon  ground  rents.  There 
is.  It  is  that  small  number  of  persons  whose  chief  in- 
vestment is  in  vacant  land,  and  whose  chief  occupation  is 
keeping  land  out  of  use. 

§  7.  The  farmers.  In  Great  Britain  and  Ireland,  no 
one  who  speaks  of  farmers  thinks  of  men  who  own 
farms.  And,  indeed,  the  very  word  "  farmer  "  signifies 
properly  one  who  hires  land  from  another.  But,  while 
we  in  the  United  States  continued  to  use  this  English 
word,  the  totally  different  circumstances  of  our  early  his- 
tory completely  transformed  its  meaning.  So  vast  a 


WHERE    THE  BURDEN  FALLS.  183 

majority  of  those  who  tilled  American  farms  owned  their 
farms,  in  fee  simple,  that  the  name  of  farmer  has,  for  long 
generations,  necessarily  implied  the  ownership  of  a  farm. 
But  little  more  than  twenty  years  ago  one  of  the  best 
informed  Americans,  addressing  an  assembly  of  learned 
and  distinguished  Europeans,  declared  that  the  number  of 
American  farmers  who  did  not  own  their  farms  was  so 
small  as  to  be  entirely  unworthy  of  consideration  in  the 
discussion  of  social  or  political  questions. 

This  tradition  still  remains  with  us  ;  and  it  is  so  in- 
grained in  our  ideas  that  in  all  discussions  of  public  ques- 
tions it  is  uniformly  assumed,  in  good  faith,  that  all 
American  farmers  are  farm-owners.  And  no  class  appears 
to  be  more  convinced  of  the  truth  of  this  assumption  than 
farmers  themselves.  Indeed,  so  deeply  rooted  is  this  con- 
viction in  all  their  habits  of  thought,  that,  so  far  as  can 
be  judged  from  the  public  utterances  of  their  especial 
representatives,  American  farmers  are  unanimously  of 
opinion,  not  only  that  they  all  own  their  farms,  but  that 
they  own  substantially  all  the  land  in  America,  except  a 
few  thousand  acres  in  a  few  large  cities. 

The  inevitable  consequence  is  that,  in  all  discussions  of 
taxation,  the  mass  of  American  farmers  take  it  for  granted 
that  every  proposition  to  increase  the  share  of  taxation 
which  falls  upon  the  value  of  land  is  a  proposition  to  in- 
crease their  share  of  the  public  burdens  ;  and  up  to  this 
time  all  tillers  of  the  soil  have  voted,  with  almost  absolute 
unanimity,  against  every  such  proposal  and  in  favor  of 
every  measure  which  even  pretends  to  increase  the  burdens 
of  taxation  on  buildings,  improvements,  and  personal 
property. 

The  census  of  1890  has  struck  a  fatal  blow  to  this  il- 
lusion. It  has  demonstrated,  as  the  figures  now  to  be 
given  will  show,  that  more  than  one  third  of  American 


184  NATURAL    TAXATION. 

farms  are  held  by  mere  tenants  (who  are,  almost  always, 
tenants  only  from  year  to  year),  and  that  less  than  half  of 
them  are  held  by  absolute  owners,  free  of  mortgage. 
The  official  returns  on  this  subject  are  as  follows  : 

Ownership  and  Hiring  of  Farms. 

Families  owning,  free 2,255,789 

incumbered .      886,957      3,142,746 

Families  hiring 1,624,433 

Total 4,767,179 

Families  owning,  free 2,255,789 

Families  hiring  or  mortgaged 2,511,390      4,767,179 

§  8.  Farmers  as  a  political  factor.  In,  addition  to 
the  1,600,000  landless  farmers  thus  hiring  farms,  there 
must  be  taken  into  account  fully  3,000,000  farm  laborers, 
of  voting  age,  who  constitute  part.of  the  farming  popula- 
tion, but  who  neither  own  nor  hire  farms.  Thus  the  land- 
less farm-voters  number  at  least  4,600,000  ;  while  the  land- 
owning farmers  number  only  3,100,000.  Assuming  that 
each  of  them  is  a  voter,  or  the  wife  of  a  voter,  the  farm- 
owners  constitute  less  than  one  fifth  of  the  voting  popu- 
lation. 

The  proportion  of  land  values  held  by  farmers  shrinks 
when  put  to  the  test  of  statistics  as  much  as  does  their 
numerical  proportion.  The  same  census  returns  the 
aggregate  real  value  of  farms  at  (in  round  numbers) 
$13,279,000,000,  out  of  a  total  taxable  real  estate  value  of 
$46,000,000,000,  including  railroads,  etc.  As  much  more 
than  one  third  of  all  farms  are  not  owned  by  farmers,  we 
must  deduct  at  least  one  third  from  this  farm  value,  in 
estimating  the  amount  owned  by  farmers.  This  would 
leave  them  in  possession  of  a  value,  in  both  land  and  its 
improvements,  of  about  $8,800,000,000,  or  less  than  one 


WHERE    THE  BURDEN  FALLS.  185 

fifth  of  the  whole  value  of  real  estate,  which  closely  cor- 
responds with  their  proportion  of  the  population. 

The  independent  farmer,  therefore,  is  a  rapidly  dimin- 
ishing factor  in  American  politics.  He  has  had  almost 
supreme  power  in  his  hands,  in  the  past ;  and  the  result 
of  his  control  of  the  government  has  been  to  put  his  class 
into  a  course  of  speedy  extinction.  Nevertheless,  the 
interests  of  the  farmers  and  farm-owners  are  entitled  to 
full  consideration  ;  and  they  shall  have  it  here.  They,  or 
those  who  assume  to  represent  them,  are  the  most  clam- 
orous opponents  of  intelligent  and  just  taxation  ;  and 
wherever  they  have  control,  they  strenuously  maintain  a 
system  of  indiscriminate  hodge-podge  taxation,  with  its 
inevitable  accompaniment  of  more  perjury  and  more  fraud 
to  each  cent  collected  than  is  attached  to  the  collection 
of  a  dollar  under  even  moderately  scientific  methods  of 
taxation. 

It  has  already  been  demonstrated,  it  is  hoped,  to  the 
satisfaction  of  every  intelligent  reader,  that  the  tax  on 
personal  property,  to  which  the  average  farmer  clings  so 
tenaciously,  only  increases  his  share  of  taxes.  But  the 
effect  of  abolishing  taxes  upon  buildings  has  been  reserved, 
so  far  as  the  farmers'  interest  is  concerned,  for  this  place. 

§  9.  Do  farm-owners  gain  by  taxing  improvements 
on  land  ?  The  farmer  is  apt  to  cry  out  against  what  he 
calls  the  injustice  of  exempting  from  all  taxation  the 
magnificent  buildings  sometimes  erected  in  cities,  forget- 
ting that  such  buildings  always  stand  upon  the  most  ex- 
pensive land,  while  his  own  farm  house  and  barns  stand 
upon  land  of  utterly  insignificant  value.  In  adjusting  tax- 
ation, the  only  question  of  importance  is  as  to  the  relative 
proportion  which  will  be  borne  by  different  classes  ;  and  it 
is  of  no  importance  whatever  that  any  single  piece  of 
property  should  pay  much  or  little,  provided  all  other 


1 86  NATURAL    TAXATION. 

properties  of  the  same  kind  pay  in  exact  proportion  with 
it.  A  farm  house,  costing  $1,500  to  build,  will  stand  upon 
a  piece  of  land  which,  including  the  surrounding  garden, 
on  an  ample  scale,  would  not  be  worth  more  than  $15. 
But  an  average  city  house,  costing  $10,000  to  build,  will 
stand  upon  a  lot  worth  at  least  $5,000 ;  while  a  warehouse, 
costing  $50,000  to  build,  will  frequently  stand  upon  a  lot 
worth  $50,000. 

So  far,  therefore,  as  the  mere  value  of  land  which  is 
required  for  the  purpose  of  supporting  the  house  or  build- 
ing of  any  kind  is  concerned,  the  farmer  would  gain  largely 
by  concentrating  taxes  upon  that  and  exempting  all 
buildings.1 

But  he  holds,  in  addition  to  the  land  upon  which  his 
house  stands,  a  number  of  acres  which  he  uses  for  farm- 
ing purposes ;  and  he  assumes  that  these  will  be  heavily 
taxed  under  a  system  of  taxation  upon  land  values  alone, 
and  that  thus  a  larger  proportion  of  the  burden  will  be 
thrown  upon  him.  This  is  an  entire  mistake.  When 
buildings  are  exempt  from  taxation  all  other  improve- 
ments on  the  land  must  also  be  exempted  ;  and  the  result 
of  this  would  be  to  assess  improved  farm  lands  at  no  higher 

1  Some  readers  may  wish  to  see  this  statement  proved  in  detail.  Taking 
the  illustrations  from  the  text,  and  supposing  a  tax  of  $1165  to  be  laid  upon 
the  three  pieces  of  property  mentioned,  the  result,  under  the  present  system, 
would  be  as  follows  : 

Farm  house  and  land,  $1515  ;  city  house  and  land,  $15,000  ;  warehouse 
and  land,  $100,000.  Total,  $116,515  ;  tax  rate,  i^.  Tax  on  the  farm  house, 
$15.15,  on  the  city  house,  $150,  on  the  warehouse,  $1000. 

Under  a  system  exempting  all  buildings  and  improvements,  the  assess- 
ment would  be  as  follows  : 

Farm  land,  $15  ;  city  land,  $5000  ;  warehouse  land,  $50,000. 

The  gross  tax  remaining  the  same  ($1165),  it  would  be  divided  on  a  total 
assessment  of  only  $55,015,  requiring  a  tax  rate  of  2\%.  The  farm  house 
owner  would  pay  32  cents  ;  the  city  house  owner,  $106  ;  the  warehouse 
owner,  $1059.  Reduction  of  farmer  s  tax',  98  per  cent. 


WHERE    THE  BURDEN  FALLS. 

value  than  perfectly  wild,  uncultivated  land  in  the  imme- 
diate vicinity.  All  fences,  all  growing  crops,  all  improve- 
ments of  every  kind  would  be  left  out  of  account ;  and 
land  would  be  assessed  only  at  the  value  which  it  would 
bring  if  it  had  been  just  swept  clean  by  a  prairie  fire. 
Very  little  consideration  is  required  to  enable  any  one  to 
see  that  under  such  a  rule  of  assessment  the  taxes  levied 
upon  farms  would  be  much  less,  in  proportion  to  those 
levied  upon  town  lots,  than  they  are  to-day,  and  that  such 
a  change  in  the  methods  of  assessment  and  taxation 
would  result  in  lessening  the  burden  of  farmers  and  farm 
owners. 

§  10.  Proportion  of  improvements  in  farm  values. 
As,  however,  this  point  is  most  obstinately  disputed,  and 
statistics  are  constantly  brought  forward  which  upon 
their  face  indicate  that  improvements  upon  farms  bear  a 
much  smaller  proportion  to  land  values  than  is  the  case  in 
cities,  the  question  needs  further  consideration.  For, 
while  we  ought  not  to  be  affected  by  the  mere  fact  that 
farmers  constitute  so  large  a  portion  of  the  voters  in  the 
United  States  as  to  give  them  a  controlling  influence  in 
the  decision  of  tax  reforms,  especially  in  view  of  their 
total  failure  in  the  past  to  exercise  that  power  for  their 
own  good,  we  ought  to  give  great  weight  to  any  evidence 
that  an  apparent  reform  would  increase  their  burdens. 

But  the  manifest  tendency  of  wealth  to  concentrate  in 
cities,  the  rapid  rise  in  the  value  of  city  lands,  and  the 
stationary  values  of  farm  lands  raise  a  strong  presump- 
tion that  land  values  bear  a  larger  proportion  to  improve- 
ments in  cities  than  in  the  country  ;  and  we  may  well  dis- 
trust the  correctness  of  any  figures  which  indicate  the 
contrary.  Improvements,  moreover,  are  merely  items  of 
personal  property,  which  have  been  fastened  to  the  land  ; 
and  having  seen  that  wealth  in  general  flows  into  cities, 


1 88  NATURAL    TAXATION'. 

we  have  good  reason  to  doubt  any  statistics  which  seem 
to  show  that  a  disproportionate  amount  of  one  kind  of 
personal  property  settles  on  farms.  On  the  other  hand, 
having  seen  that  the  taxation  of  movable  chattels  falls 
most  heavily  upon  farmers,  notwithstanding  the  universal 
expectation  that  it  would  not  do  so,  we  are  prepared  to 
find  some  similar  miscalculation  with  respect  to  those  im- 
movable chattels  which  are  called  improvements  upon  land. 
§  II.  The  true  test.  Some  assessments  profess  to 
separate  the  value  of  lands  from  the  value  of  improve- 
ments. But  it  would  seem,  in  all  cases,  that  only  build- 
ings are  reckoned  as  improvements ;  and  it  is  certain  that 
the  value  added  to  land,  by  drains,  irrigation,  and  all  the 
different  forms  of  preparing  land  for  cultivation,  is  never 
separately  stated.  It  is  true  that  much  of  this  added 
value  cannot  now  be  distinguished,  having  been  created 
so  long  ago  that  no  estimate  of  it  can  fairly  be  made. 
But  precisely  the  same  thing  is  true  of  still  more  expen- 
sive improvements  made  in  cities,  paid  for  by  local  assess- 
ments in  past  years.  Setting  these  aside,  as  balancing 
each  other,  farmers  have  a  great  advantage  in  certain  uni- 
versal tests,  of  easy  and  almost  uniform  application.  Al- 
most every  farm  has  some  land  within  its  limits,  or  closely 
adjoining  it,  which  is  entirely  unimproved,  either  never 
having  been  prepared  for  cultivation,  or  having  lost  all 
that  had  been  done  for  that  purpose.  The  value  of  this 
land  will  afford  the  proper  measure  for  valuing  the  rest. 
The  improved  land  should  be  estimated  at  no  greater 
value  than  the  unimproved.  In  the  very  few  cases,  in 
which  every  foot  of  ground  in  a  farm  is  cultivated,  the 
price  which  could  be  obtained  for  land  taken  out  of  an 
adjoining  highway  would  afford  as  good  a  test.  In  the 
latter  case  due  allowance  would  be  made  for  the  superior 
value  attaching  to  such  land,  over  the  rest  of  the  farm, 


WHERE    THE  BURDEN  FALLS.  189 

by  reason  of  its  nearness  to  the  road.  The  valuation 
would,  in  every  case  of  farm  assessments,  be  based  on  the 
market  price  of  the  land,  as  it  would  be  if  the  soil  had 
never  been  broken  up  or  in  any  way  prepared  for  use. 
The  assessor  would  not  inquire  what  was  on  the  land 
fifty  years  before  ;  but  he  would  look  at  the  surrounding 
land,  under  present  conditions ;  and  it  would  bj  his  duty 
to  reduce  the  valuation  of  land  which  had  been  broken 
up,  plowed,  fertilized,  drained,  cleared,  and  cultivated,  to 
a  level  with  other  land,  equally  well  or  ill  situated,  for 
which  nothing  of  the  kind  had  been  done. 

At  the  present  time,  it  is  understood  that  Western  wild 
land,  which  may  be  had  for  $5  an  acre  in  its  original 
state,  sells  for  $15  when  even  fairly  prepared  for  farm- 
ing. A  deduction  of  66  per  cent.,  therefore,  would  seem 
to  be  the  lowest  allowance  required  on  this  account. 
But  this  low  rate  is  only  applicable  to  land  free  from 
heavy  stones,  stumps  of  trees,  and  similar  natural  defects. 
The  deduction  to  be  made  from  the  market  value  of 
lands  which  have  been  cleared  from  such  defects,  or  which 
have  been  drained,  irrigated  or  otherwise  permanently 
improved,  would  be  much  greater.  In  Massachusetts 
cultivated  farm  land  is  worth,  on  an  average,  $55,  while 
uncultivated  but  improvable  land  is  worth  only  $15.' 

As  a  matter  of  course,  no  assessment  would  be  made 
upon  the  transient  increase  of  value  arising  from  fertili- 
zation, plowing,  growing  crops,  fruit  trees,  or  anything  of 
that  kind.  To  this  extent  the  principle  has  been  recog- 
nized in  the  new  Constitution  of  California,  which  directs 
that  cultivated  and  uncultivated  land  shall  be  assessed 
alike. 

Upon  the  whole,  it  is  safe  to  say  that,  under  a  system 
of  valuation  excluding  all  improvements,  cultivated  farms 
1  See  Appendix  to  this  chapter. 


NATURAL    TAXATION. 

would  be  assessed  at  less  than  40  per  cent,  of  their  whole 
value,  improvements  included.1 

§  12.  Comparison  of  farms  with  cities.  The  case  of 
cities  stands  in  strong  contrast.  In  no  large  city  are 
buildings  worth  more  than  50  per  cent,  of  all  real  estate  ; 
while  in  Boston  they  are  valued  even  by  assessors  at  only 
40  per  cent.  As  under  the  present  system  vacant  land  is 
uniformly  assessed  much  lower,  in  proportion  to  its  mar- 
ket price,  than  is  land  covered  by  buildings,  it  is  evident 
that  the  bare  land  of  cities  is  worth  much  more  than  60 
per  cent,  of  their  real  estate.  From  this  value  there  can 
be  no  such  deduction  as  is  proper  in  the  case  of  farms. 
Cultivation,  crops,  and  fences  add  nothing  to  the  market 
price  of  city  lots.  The  cost  of  roads  and  other  public 
improvements  has  not  been  deducted  from  the  assessable 
value  of  farms;  and  therefore  it  must  not  be  deducted 
from  the  value  of  city  lots.  If  allowed  in  one  instance, 
it  must  be  allowed  in  the  other  ;  and  in  the  end  it  would 
make  little  or  no  difference  in  the  relative  burden  of  tax- 
ation. It  is  better,  therefore,  to  make  no  allowance  for  it 
in  either  case. 

The  result  of  a  total  exemption  of  improvements  from 
taxation  would  thus  appear  to  be  a  reduction  of  more  than 
50  per  cent,  in  the  taxable  value  of  farms,  and  of  less  than 
40  per  cent,  in  the  taxable  value  of  cities.  Of  course,  the 
reduction  would  be  less  in  farms  lying  close  to  cities,  and 
more  in  towns  of  small  population,  even  though  dignified 
with  the  titles  of  cities.  Farms,  when  really  held  on  spec- 
ulation as  town  lots,  are  not  entitled  to  rank  with  farms  ; 
and  villages  are  not  made  cities,  by  labelling  them  as  such. 

Comparing  real  farms  with  real  cities,  the  exemption  of 
all  personal  property  and  improvements  would  reduce  the 
taxation  of  farm  owners  in  states  having  large  towns  by 
1  See  Appendix  to  this  chapter. 


WHERE    THE  BURDEN  FALLS.  igi 

at  least  30  per  cent.  For  every  $100  now  paid  by  them 
they  would  then  pay  less  than  $70.' 

Nor  is  this  all  which  the  farm  owner  would  gain. 
Under  the  present  system,  an  enormous  amount  of  land 
value,  in  the  form  of  railway,  telegraph,  telephone,  gas- 
light and  electric  light  franchises,  goes  untaxed.  Most 
of  this  is  found  in  cities  and  towns.  All  this  would  be 
taxed  at  its  proper  value,  under  the  system  which  would 
immediately  spring  up  if  personal  property  and  improve- 
ments were  exempted  ;  and  the  taxes  thus  collected 
would  go  in  relief  of  farms.  But  this  belongs  to  a  later 
period  of  this  discussion. 

§  13.  The  farmers'  loss  and  gain.  It  having 
now  been  shown  that  taxes  upon  personal  property  and 
improvements  of  land  bear  more  severely  upon  farmers 
than  upon  any  other  class  of  property  owners  in  the 
United  States,  it  only  remains  to  give  a  summary  state- 
ment of  the  general  effect  which  the  concentration  of  all 
taxes  upon  ground  rents  would  have  upon  American 
farmers,  taken  as  an  entire  class. 

Using  round  numbers,  it  has  been  shown  that  the  total 
ground  rent  of  the  United  States  for  1890  was  $1,380,- 
000,000  ;  the  whole  amount  of  taxes  to  be  provided  for 
was  $828,000,000 ;  the  local  taxes  on  real  estate  were 
$354,000,000,  and  on  personal  property,  $i  17,000,000  ;  the 
national  taxes,  all  indirect,  were  $358,000,000  ;  while  the 
burden  of  private  profit  or  of  waste,  caused  by  the  na- 
ture of  indirect  taxes,  was  about  $700,000,000  in  1880, 
and  could  not  well  be  less  in  1890. 

1  This  may  be  verified  by  comparing  the  assessments  of  Hamilton  County 
(Cincinnati)  and  Medina  County,  Ohio  (Ante,  p.  90).  It  will  be  found 
that  if  these  two  counties  were  assessed  on  land  values  alone,  estimating 
them  at  60  per  cent,  of  real  estate  in  the  city  and  50  per  cent,  in  the  coun- 
try, Medina's  share  would  be  fully  30  per  cent,  less  than  it  is  now. 


192  NATURAL    TAXATION. 

It  will  not  make  much  difference  whether  the  farmers' 
share  of  land  values  in  the  United  States  is  estimated  at 
more  or  less  than  30  per  cent.,  since  their  proportion  of  local 
taxation  will  vary  in  proportion  thereto.  But  according 
to  the  census  of  1890  the  value  of  farms  was  less  than 
30  per  cent,  of  the  value  of  all  taxable  real  estate  and 
land  privileges.1 

Farmers  have  never  made  any  profit  out  of  the  higher 
prices  caused  by  indirect  taxation  ;  and  therefore  they 
have  paid  their  share  of  all  profit  so  made,  without  re- 
ceiving any  part  of  it  back. 

Since  American  farms  constituted,  in  1890,  30  percent, 
of  all  real  estate,  their  owners  must  have  paid  at  least  30 
per  cent,  of  the  taxes  on  real  estate.  In  fact  they  paid 
more  ;  because  land  franchises  did  not  pay  their  share. 
It  has  been  demonstrated  that  they  have  always  paid 
more  than  their  proper  share  of  taxes  on  personal  prop- 
erty ;  and  they  have  certainly  paid  at  least  one  fourth  of 
such  taxes,  taking  the  country  at  large. 

Indirect  taxes  are  of  course  paid,  not  in  proportion  to 
wealth  or  income,  but  according  to  consumption.  If 
farmers  live  as  well  as  other  people,  they  pay  such  taxes 
in  proportion  to  their  numbers,  not  their  property.  It 
may  be  assumed  that  they  are  more  frugal  than  most 
other  land-owners.  But  farm  owners,  who  form  one 
fourth  of  all  families,  live  in  much  better  style  than  do 
the  great  mass  of  landless  people.  They  therefore  pay  at 
least  one-fourth  of  all  indirect  taxes.  We  thus  reach  the 
conclusions  now  stated. 

American  farm  owners  pay,  under  the  present  system 
of  taxation  : 

1  True  value  of  all  taxable  real  estate,  over  $46,000,000,000  ;  of  farms, 
$13,279,000,000. 


WHERE    THE   BURDEN  FALLS.  193 

30  %  of  taxes  on  real  estate  ($354,000,000) $106,200,000 

25  %  of  taxes  on  personal  property  ($117,000,000) 29,250,000 

25  %  of  indirect  taxes  and  profits  thereon  ($i  ,050,000,000) 262, 500,000 

$397,950,ooo 


They  would  pay  under  the  system  here  proposed : 

30  per  cent,  of  all  necessary  taxes,  with  no  indirect  burdens 

attached  ($828,000,000) $248,400,000 

Reduction  of  Farmers'  Taxes,  through  direct  taxation $149,550,000 

Thus  the  farmers  would  save  much  more  than  one 
third  of  their  present  tax  burdens  by  the  concentration 
of  taxes  on  ground  rents  alone. 

§  14.  Relief  of  farmers,  without  injustice  to  others. 
The  question  is  naturally  asked :  "  Since  a  certain  sum 
must  be  raised,  in  any  event,  for  the  support  of  govern- 
ment, how  can  the  burden  of  farmers  as  a  class  be  light- 
ened, without  increasing  to  the  same  extent  the  burden 
of  cities  and  towns  ?  " 

Of  course,  the  proposal  to  collect  taxes  from  only  one 
source  implies  that  the  burden  is  to  be  increased  upon 
the  class  which  controls  that  source.  But  the  proposal  is 
that  the  whole  burden  shall  be  placed  upon  the  owners  of 
ground  rents,  including  the  franchises  on  land.  Such 
owners  form  a  very  small  minority  of  the  residents  of 
cities  and  towns ;  and  therefore  a  vast  majority  of  such 
residents  would  not  suffer  any  increase  of  burdens, 
through  any  amount  of  relief  which  might  be  given  to 
farmers.  Town  people  will  always  pay  most  of  the  rent 
of  every  highly  civilized  country.  They  pay  no  less 
rent  when  the  farmers  are  taxed  heavily  than  they  would 
pay  if  the  farmers  were  not  taxed  at  all.  There  is  no 
conflict  of  interest  between  those  who  live  in  cities  and 
those  who  live  on  farms.  But  there  is  a  great  conflict 


194  NATURAL    TAXATION 

of  interest  between  those  who  own  city  land  and  those 
who  own  the  farms.  Under  a  single  tax  upon  ground 
rents,  farm  owners,  as  a  class,  would  not  pay  nearly  so 
large  a  share  of  taxes  as  they  do  now ;  because  the  value 
of  their  land  is  so  much  less  than  the  value  of  city,  town, 
and  railway  land.  All  that  they  would  thus  save  would 
be  cast  upon  the  owners  of  city  and  town  lots,  or  de- 
ducted from  the  excessive  profits  of  monopolies.  But 
the  tenants  of  town  property  would  gain  fully  as  much 
as  the  owners  of  farms. 

APPENDIX  TO  CHAPTER  XII. 

The  census  of  Massachusetts  for  1885  (the  latest  published) 
gives  a  full  statement  of  the  assessed  value  of  farm  property, 
distinguishing  between  improved  land,  unimproved  land, 
unimprovable  land,  and  buildings.  The  writer  is  not  aware 
of  the  existence  of  any  other  statistics  of  this  kind  worthy  of 
the  least  confidence.  But  these  are  evidently  prepared  hon- 
estly and  intelligently,  although  large  allowance  must  of  course 
be  made  for  errors. 

This  census  showed  the  results  of  investigations  into  45,010 
separate  farms  or  farm  plots.  On  these  "  farms  "  (as  it  is  most 
convenient  to  call  them)  there  were  46,109  dwelling  houses 
and  50,275  barns  or  other  outbuildings.  The  average  value  of 
each  farm  was  $2,459.47,  of  each  house  $1,009.76,  and  of  each 
outbuilding  $408.70. 

The  real  estate  of  all  farms  was  classified  as  follows  : 

Cultivated  land.  . .  .     939,260  acres. .  .  .$59,891,808 

Unimproved 1,479,454      "      ...     24,719,798 

Unimprovable 90,213  ....         809,892 

Woodland 1,389,502      "     ....  25,279,209 

Total  land  values $110,700,707 

Buildings 74,418,218 

Total  value  of  land  and  buildings $185,118,925 

The  average  value  per  acre,  for  the  entire  State,  of  farm 
lands  without  buildings,  was,  for  cultivated  land,  $63.76;  for 


WHERE    THE  BURDEN  FALLS.  1 95 

uncultivated,  $16.26;  for  woodland,  $18.17;  f°r  unimprovable, 
less  than  $9.  But  these  values  include  land  in  cities,  which 
of  course  was  held  for  sale  as  town  lots.  Omitting  land  in 
cities,  the  average  values  were,  for  cultivated,  $55.05;  for  un- 
cultivated, $15.15;  for  woodland,  $17.46. 

Under  the  California  rule,  which  would  be  followed  under 
any  system  for  the  taxation  of  pure  ground  rents,  the  cultivated 
land  would  be  assessed  at  no  higher  value  than  the  other  land. 
Assuming,  however,  that  cultivated  land  is  better  situated  than 
other  land,  and  should  therefore  be  valued  about  one  third 
higher,  say  at  $20  per  acre,  the  total  valuation  of  Massachusetts 
farm  lands  would  have  been,  in  1885,  about  $69,594,100.  This 
would  have  been  the  taxable  value,  instead  of  $185,118,925, 
which  was  the  taxable  value  under  the  present  system,  so  be- 
loved by  Massachusetts  farmers. 

The  result  of  excepting  all  buildings  and  improvements  from 
taxation  would,  therefore,  be  to  reduce  the  assessment  of  farms 
62  per  cent.  Or,  to  put  it  in  the  other  way,  farms  would  be 
assessed  at  only  38  per  cent,  of  the  present  rate. 

Now  let  us  compare  the  reduction  in  the  farm  assessments 
which  would  be  made  under  the  tax  on  ground  rents  alone,  with 
the  reduction  which  would  be  made  in  city  assessments  as  re- 
turned in  1890.  The  proportion  has  remained  the  same,  sub- 
stantially, for  many  years. 

Boston  and  Brookline  (which  are  territorially  one)  were  as- 
sessed for  $386,735,775  in  land  and  $263,181,500  in  buildings. 
There  is  no  deduction  to  be  made  in  cities  on  account  of  the 
non-cultivation  of  land.  The  pure  land  value  of  Boston  was, 
therefore,  59  J  per  cent,  of  all  its  real  estate;  and  the  reduction 
in  its  assessment  would  be  only  40^  per  cent.,  as  compared 
with  62  on  the  farms.  The  reduction  to  farms  would  thus  be 
50  per  cent  greater  than  the  reduction  in  Boston.  In  Lowell, 
Springfield,  and  Worcester,  which  have  within  their  limits  a 
good  deal  of  farm  land,1  the  value  of  land  and  buildings  are 

1  Farm  land  in  Lowell,  3478  acres  out  of  a  total  of  5989  ;  in  Springfield, 
13,277  out  of  16,807  ;  in  Worcester,  18,249  out  of  20,835. 


196  NATURAL    TAXATION. 

nearly  equal.  But  even  as  against  them,  farms  would  have  an 
advantage  of  25  per  cent,  under  the  proposed  system. 

If  all  the  taxes  of  Massachusetts  were  collected  from  real 
estate  and  divided  between  Boston  and  the  farms,  the  farms 
would  pay  45  per  cent,  more,  under  the  present  system  of  taxing 
both  land  and  improvements,  than  they  would  pay  under  a 
tax  upon  the  value  of  land  alone. 

No  statement  of  the  whole  amount  of  personal  property  as- 
sessed upon  Massachusetts  farms  alone  is  accessible.  But  by 
comparing  three  counties,  Berkshire,  Franklin,  and  Hampshire, 
in  which  the  value  of  farms  in  1885  constituted  more  than 
half  the  value  of  all  real  estate,  with  Suffolk  County,  in  which 
farms  constituted  only  the  one  hundred  and  twentieth  part  of 
real  estate,  we  can  reach  a  very  fair  conclusion  as  to  the 
effect  of  the  exemption  of  both  personal  property  and  im- 
provements. 

As  we  are  compelled  to  compare  the  farm  values  of  1885 
with  the  total  assessments  of  1890,  there  is  no  use  in  giving 
precise  figures  ;  and  round  numbers  will  therefore  be  used. 
The  assessed  value  of  all  property  in  Suffolk  County  was 
$85 1,000,000.  In  the  three  farming  counties  it  was  $91,000,000. 
If  personal  property  and  buildings  had  been  exempted,  and 
land  had  been  assessed  at  its  unimproved  value,  the  assessment 
of  Suffolk  would  have  been  $377,000,000,  and  that  of  the  three 
farming  counties  would  have  been  less  than  $22,000,000.  Thus 
the  assessment  of  Suffolk  County  (which  is  only  another  name 
for  Boston)  would  have  been  reduced  56  per  cent.;  but  the  as- 
sessment of  the  farming  counties  would  have  been  reduced  76 
per  cent.  Assuming  the  rate  of  taxation  to  be  i  per  cent,  on 
the  present  valuation,  Boston  would  pay,  under  the  present 
system,  $8,5 10,000,  and  the  farming  counties,  $910,000.  Under 
the  reformed  system,  Boston  would  pay  $8,900,000,  while  the 
farming  counties  would  pay  only  $520,000.  The  burden  upon 
farms  would  be  lightened  by  43  per  cent.,  and  yet  the  burden 
of  Boston  would  be  increased  by  less  than  5  per  cent.  ;  the  State 
receiving  precisely  the  same  revenue,  in  any  case.  Or,  to  put 


WHERE    THE  BURDEN  FALLS.  197 

it  the  other-way,  Massachusetts  farmers  are  paying  75  per  cent. 
more  of  the  State  taxes,  under  the  present  system,  than  they 
would  pay  under  a  tax  upon  the  unimproved  value  of  land  alone. 

And  still  the  Massachusetts  farmers  are  clamorously  demand- 
ing the  perpetuation  and  extension  of  the  very  system  which 
makes  their  burdens  heavier,  and  would  almost  lose  their  senses 
if  their  taxes  were  reduced  40  per  cent,  by  a  rational  system  of 
taxation. 

These  statistics  are  taken  from  the  Massachusetts  "  Census 
of  agricultural  products  and  property,"  for  1885,  and  the  offi- 
cial "  Aggregates  of  polls,  property,  and  taxes,"  assessed  in 
1890.  The  census  can  be  found  in  any  good  library.  The 
other  document  can  probably  be  obtained  from  the  Secretary 
of  State. 

After  the  foregoing  pages  were  in  type,  it  was  suggested  by 
a  critic,  worthy  of  the  highest  respect,  that  these  differences  in 
value  might  be  mainly  the  result  of  differences  in  site,  near- 
ness to  markets,  or  inherent  qualities  of  the  land.  But  it  will 
be  found  that  this  is  not  so.  The  Massachusetts  census  shows 
that  about  the  same  ratio  of  difference  runs  all  through  the 
State,  in  the  towns  nearest  to  markets  as  well  as  in  those  most 
distant,  in  the  largest  cities  and  in  the  smallest  villages,  on  the 
hills  and  on  the  plains,  where  land  is  dear  and  where  it  is 
cheap.  The  allowance  of  twenty  per  cent,  made  above  for 
the  probable  superiority  of  natural  advantages  possessed  by 
cultivated  land  seems,  upon  close  examination  of  the  returns, 
to  be  ample. 

Taking  the  three  counties  in  Massachusetts  where  farms  are 
of  greatest  importance  compared  with  other  investments,  we 
find  the  average  value  per  acre  of  all  farm  real  estate,  includ- 
ing buildings,  of  cultivated  land,  of  pasture  land  capable  of 
cultivation,  and  of  all  unimproved  land,  to  run  as  follows  : 


Counties. 
Berkshire  

Real  Estate. 

$3'3I     2O 

Cultivated 
Land. 
SJb-jg    ft? 

Pasture 
Land. 

$12    A^ 

Unimproved 
Land. 

$T  T      Tr\ 

Franklin  

SPj  *•    "^ 
2Q    2O 

SP,}(J     *-*  / 
4O    IQ 

V-1^    43 
Q   OO 

i  A    iy 

Q   OO 

Hampshire  

•^V 

34  70 

39  32 

10  50 

9  65 

198  NATURAL    TAXATION. 

All  land  which  is  considered  not  worthy  of  improvement  is 
excluded  from  pasture  land.  Yet  it  will  be  seen  that,  if  im- 
provements of  all  kinds  were  excluded  from  assessment,  the 
real  estate  of  farms  in  Berkshire  County  would  be  assessed  at 
only  40  per  cent.,  in  Franklin  County  at  only  33  per  cent., 
and  in  Hampshire  County  at  only  30  per  cent,  of  the  assessed 
value  under  the  present  system. 

All  these  counties  are  within  easy  reach  of  good  markets, 
but  Franklin  and  Hampshire  are  especially  so.  Berkshire,  on 
the  other  hand,  has  a  much  larger  number  of  summer  visitors, 
who  are  good  customers  for  the  season. 

Selecting  single  towns,  at  the  extremes  of  wealth,  we  find 
much  the  same  results.  In  Berkshire  County  Stockbridge  has 
the  highest-priced  land  and  Savoy  the  lowest-priced.  In 
Stockbridge  the  average  value  of  improved  land  is  about  $112 
per  acre,  of  unimproved  land  $49,  and  of  land  and  buildings 
$118.  In  Savoy  improved  land  is  valued  at  about  $7,  land 
and  buildings  the  same,  and  unimproved  land  at  $2.87. 
Therefore,  if  assessments  were  made  upon  the  value  of  unim- 
proved land  only,  farms  in  wealthy  Stockbridge  would  be 
assessed  at  41  per  cent,  of  their  present  rate,  and  in  poor 
Savoy  precisely  the  same. 

The  writer  is  well  aware  that  statistics  can  be  prepared  from 
assessment  rolls  in  other  States  showing  apparently  different 
results.  He  has  carefully  studied  such  returns  from  a  dozen 
different  States.  If  any  of  them  had  even  pretended  to  give  an 
extended  statement  of  farm  values,  it  should  have  been  ana- 
lyzed here.  But  not  one  of  them  does  this  ;  nor  does  one  pre- 
tend to  distinguish  between  buildings  and  other  improvements. 
Almost  without  exception,  they  are  admitted,  by  the  officers  is- 
suing them,  to  be  worthless.  In  Nebraska,  the  auditor  states  that 
the  assessments  are  only  about  5  per  cent,  of  true  values.  In  Illi- 
nois, they  are  about  12  to  15  per  cent.  If  there  were  any  uni- 
formity in  such  undervaluations,  the  tables  might  still  be  useful; 
but  there  is  none.  These  returns  are  simply  monuments  of  the 
phenomenal  incapacity  or  dishonesty  of  American  assessors. 


CHAPTER   XIII. 
SOCIAL  EFFECTS  OF  NATURAL  TAXATION. 

§  I.  The  effect  in  general.     The  adoption  of  a  natu- 

1,  intelligent,  and  scientific  system  of  taxation  would 
bring  about  a  just  distribution  of  wealth,  would  give  a 
perpetual  stimulus  to  industry  and  production,  would 
greatly  increase  wages,  would  increase  the  profits  of 
capital,  would  give  a  security  to  property  now  un- 
known, would  encourage  manufactures,  commerce,  and 
agriculture,  and  would  incidentally  solve  many  social 
problems  which  under  present  conditions  seem  almost 
insoluble. 

It  is  hoped  that  as  each  branch  of  the  inquiry  has  been 
discussed,  it  has  appeared  that  each  step  towards  this 
great  but  simple  reform  has  been  attended  with  the  solu- 
tion of  some  difficult  problem.  But  others  have  been 
reserved  for  this  final  review. 

§  2.  Stimulus  to  production.  It  must  surely  be  evi- 
dent, without  argument,  that  when  all  taxes  are  concen- 
trated upon  ground  rents  alone,  and  when  every  piece  of 
land  is  estimated  for  assessment  at  the  amount  for  which 
it  could  be  rented  for  present  use,  the  tax  constantly  in- 
creasing, in  exact  proportion  to  any  increase  in  the  rental 
value  of  the  land,  it  would  generally  be  impossible  to 
hold  any  land  out  of  use  for  the  purpose  of  speculation. 
The  only  exception  would  be  cases  in  which  it  was  so 
clearly  desirable  that  the  land  should  be  preserved  for 

199 


20O  NATURAL    TAXATION. 

future  use,  that  its  possessor  could  better  afford  to  pay 
the  tax  out  of  his  capital  than  to  allow  the  land  to  be  put 
to  any  present  use  which  would  spoil  it  for  a  more  desira- 
ble future  use.  The  pressure  put  upon  the  land-owner  to 
make  immediate  and  beneficial  use  of  the  land  would,  in 
most  cases,  be  irresistible.  The  result,  in  all  but  a  few 
exceptional  cases,  would  be  that  all  land,  which  any  one 
cared  to  claim  as  owner,  would  be  put  into  immediate 
use  for  productive  purposes  ;  while  a  vast  amount  of  land 
which  is  now  held  for  pure  speculation,  would  be  aban- 
doned to  the  use  of  any  one  who  was  willing  to  pay  the 
annual  tax. 

Under  such  a  system  all  land  would  be  made  useful,  up 
to  its  full  capacity.  The  possession  of  land  would  neces- 
sitate the  constant  employment  of  labor  in  its  use  and 
development ;  and  all  who  were  unable  or  unwilling  to  use 
land  to  the  best  advantage  of  the  community  would 
abandon  it  to  those  who  were  both  able  and  willing. 

But  this  is  only  one  of  the  many  stimulants  to  produc- 
tion which  are  involved  in  reformed  taxation.  Think  of 
the  many  other  encouragements  which  industry  would 
receive.  Money  and  credit,  free  from  all  taxes,  would 
crowd  into  the  industrial  field.  Factories,  mills,  furnaces, 
foundries,  workshops,  stores,  offices,  machinery,  tools,  in- 
struments of  production  in  every  conceivable  form,  would 
all  be  free  from  taxes.  The  farmers'  barns,  crops,  plows, 
tools  and  implements,  his  horses,  cattle,  sheep,  materials 
and  products  of  every  kind,  would  be  free  of  tax.  His 
land  could  be  drained,  stubbed,  subsoiled  and  improved 
to  the  highest  point,  without  adding  a  dollar  to  his  taxes. 
Commerce  would  be  free  as  air.  The  farmer  would  buy 
in  the  cheapest  market,  and  sell  in  the  dearest.  Monopoly 
could  no  longer  hinder  production.  The  only  limit  of 
production  would  be  the  limit  of  demand. 


SOCIAL  EFFECTS  OF  NATURAL   TAXATION.         2OI 

§  3.  Effect  on  wages.  Using  the  term  "  wages  "  as 
including  all  forms  of  compensation  for  personal  labor,  it 
should  seem  clear  that  the  great  increase  in  production 
which  would  thus  be  brought  about  must  greatly  increase 
the  demand  for  labor,  and  would  therefore  produce  a 
general  and  permanent  advance  in  wages. 

Nominal  wages,  expressed  in  terms  of  money,  must  ad- 
vance, because  there  would  be  an  anxious  demand  for 
labor  on  the  part  of  all  land-owners.  For  without  a  con- 
stant supply  of  efficient  labor,  the  annual  tax  could  not 
be  paid  ;  and  then  the  land  would  fall  into  the  hands  of 
those  who  would  extract  from  the  land,  either  by  their 
own  labor  or  by  the  labor  of  others,  a  revenue  sufficient 
to  pay  the  tax,  with  a  profit.  The  increased  demand  for 
labor  thus  arising  would,  in  any  country  large  enough  to 
make  a  rate  of  its  own,  largely  increase  the  general  rate 
of  wages.  That  this  is  the  invariable  result,  in  all  similar 
cases,  has  been  abundantly  proved  by  past  experience. 
The  opening  of  new  land  to  labor  has  always  tended  to  in- 
crease wages  ;  and  under  the  proposed  system  of  taxation 
there  would  be  an  enormous  increase  in  the  new  land  thus 
opened  to  labor,  and  therefore  a  corresponding  increase 
in  the  reward  of  labor.  The  effect  upon  wages  would  be 
precisely  that  which  would  be  produced  by  the  discovery 
of  a  new  continent  of  fertile  and  healthy  land. 

Real  wages  (in  other  words,  the  real  reward  of  labor) 
would  be  increased  to  a  much  greater  extent  than  nominal 
wages.  For  while  wages,  expressed  in  forms  of  money, 
must  rise,  as  already  shown,  prices  of  the  good  things 
which  wages  buy  would  fall,  on  account  of  the  much 
greater  production  of  such  things,  which  would  result 
from  the  immensely  greater  application  of  labor  and 
capital  to  land.  More  than  this,  it  having  been  already 
shown  that  the  bulk  of  taxation  is  now  borne  by  the  wage- 


2O2  NATURAL    TAXATION. 

earners,  and  that  the  whole  of  this  taxation  would  be 
taken  off  their  shoulders  by  the  new  system,  their  real 
income  would  be  practically  increased  by  the  full  amount 
of  this  reduction  of  taxation  ;  the  effect  of  which  they 
would  feel  in  a  general  reduction  of  the  cost  of  living. 

§  4.  Effect  on  money  wages.  The  advance  in  money 
wages  must,  of  necessity,  be  rather  vaguely  estimated. 
But  long  experience  has  furnished  abundant  means  for 
trustworthy  calculations.  It  is  not  at  all  necessary  that 
there  should  be  a  demand  for  double  the  number  of 
laborers,  to  double  the  rate  of  wages.  A  much  smaller 
increase  in  the  demand  will  suffice,  so  long  as  the  supply 
of  labor  does  not  meet  the  demand. 

It  having  been  shown  that  the  taxation  of  ground  rents 
would  compel  their  owners  to  employ  labor  in  producing 
something,  out  of  which  taxes  could  be  paid,  while  the 
release  of  the  great  purchasing  class  from  heavy  tax- 
ation would  enlarge  their  purchasing  power,  it  follows  that 
an  immediate  demand  for  labor  would  arise,  in  excess  of 
the  local  supply.  The  degree  to  which  wages  would  rise,  in 
consequence  of  this  demand,  would  largely  depend  upon 
the  extent  of  the  field  over  which  the  new  system  of  taxa- 
tion was  in  force.  The  adoption  of  just  taxation  in  a  single 
county,  or  even  in  an  entire  State,  would  cause  a  great  in- 
crease of  production  there ;  but  wages  would  be  kept 
down,  to  a  considerable  degree,  by  the  incoming  of  labor- 
ers from  outside. 

§  5.  Immigration  and  wages.  But  the  adoption  of 
just  taxation,  throughout  the  United  States,  would  cause 
a  rise  in  wages  far  too  great  to  be  repressed  by  foreign 
immigration.  Laborers  of  all  kinds  have  never  yet  come 
to  America,  in  any  one  year,  to  the  extent  of  even  one 
twentieth  part  of  the  home  supply.  As  the  new  arrivals 
furnish  a  market  for  nearly  all  that  they  earn,  they  do  not, 


SOCIAL  EFFECTS  OF  NA  TURAL   TAXA  TION.         203 

at  the  utmost,  furnish  an  element  of  competition  with 
native  laborers  in  excess  of  one  half  of  their  earnings.1  If, 
therefore,  the  average  rate  of  American  wages  could  be 
doubled,  by  causes  having  a  permanent  operation,  immi- 
gration might  continue  at  full  tide,  for  many  years,  before 
it  could  seriously  affect  wages.  The  truth  of  this  theory 
may  be  illustrated  by  the  case  of  domestic  servants.  From 
various  causes  their  average  wages  in  the  United  States 
have  much  more  than  doubled  since  1860.  Those  who 
then  received  $6  a  month  could  now  readily  earn  $  14,  while 
living  in  much  greater  comfort  and  having  much  easier 
work.  The  immigration  of  women  of  this  class  has  been 
enormous ;  but  it  has  never  reduced  wages.  It  may  well 
be  doubted  whether  it  has  even  had  any  material  influence 
in  preventing  a  further  advance.  All  the  great  advance 
in  the  wages  of  domestic  servants  has  occurred  since  they 
began  to  arrive  in  great  numbers. 

We  may  safely  assume  that  any  rise  in  wages  which 
would  result  from  a  reform  in  taxation,  extending  over  the 
whole  or  the  larger  portion  of  the  United  States,  would  be 
permanent,  notwithstanding  any  probable  amount  of 
immigration. 

§6.  Amount  of  rise  in  wages.  As  the  purchasing 
power  of  laborers  would  be  increased  at  least  1 5  per  cent, 
from  the  instant  at  which  taxes  were  taken  off  their  pur- 
chases, an  increase  of  demand  to  that  extent  may  be  as- 
sumed as  certain,  subject  to  such  reduction  of  demand 
as  might  be  caused  by  the  reduced  profits  of  the  not  more 
than  50,000  families,  who  would  suffer  any  loss  of  in- 

1  Thus,  suppose  800,000  immigrants  to  arrive  in  one  year,  less  than  half  of 
them  would  be  competitors  for  wages.  Suppose  the  400,000  competing 
laborers  to  earn  $400  each.  They  would  spend  $350  of  this.  Half  of  this 
would  be  paid  in  wages  to  other  laborers,  producing  what  the  new-comers 
wanted.  Even  if  the  other  half  injuriously  affected  resident  laborers,  it 
would  amount  to  less  than  one  cent  in  each  dollar  of  their  annual  wages. 


2O4  NATURAL    TAXATION. 

come  through  the  new  taxation.  As  their  losses  would 
not  trench  upon  their  usual  fund  for  expenditure,  their  pur- 
chases would  fall  off  only  to  a  very  moderate  degree.  An 
allowance  of  $3000  for  each  of  these  families  would  be  ample. 
This  would  amount  in  all  to  $i  50,000,000,  or  not  more  than 
one  tenth  of  the  increase  in  the  purchasing  power  of  the 
other  classes.  After  making  large  allowance  for  a  saving  dis- 
position among  the  poorer  classes,  under  their  new  pros- 
perity, it  is  impossible  to  estimate  the  increase  in  purchases 
at  less  than  ten  per  cent.,  or  1,000,000,000  per  annum. 
It  would  probably  be  much  more. 

On  the  other  hand,  the  anxiety  of  land-owners  to  put 
their  land  to  profitable  use,  the  absolute  release  of  all  pro- 
ductive industry  from  burdens,  shackles,  and  restrictions, 
the  untaxed  money,  untaxed  manufactures,  untaxed  com- 
merce, untaxed  agriculture  and  untaxed  credit  would  all 
combine  to  give  a  sudden  and  tremendous  stimulus  to 
industry.  Production,  for  these  reasons  alone,  could  not 
fail  to  increase  immensely.  Adding  this  consideration  to 
the  other,  the  effective  demand  for  labor  could  not  fail  to 
increase  by  more  than  one  third  ;  and  this  would  cause  a 
rise  in  wages  of  fully  100  per  cent. 

§7.  Effect  on  capital.  The  owners  of  capital  will  natu- 
rally desire  to  know  how  their  interests  will  be  affected. 
Will  not  the  doubling  of  wages  diminish  the  profit  of  cap- 
ital ?  No.  On  the  contrary  it  will  greatly  increase  that 
profit. 

In  the  first  place,  it  must  be  remembered  that  ground 
rents  are  not  capital.  Correctly  speaking,  they  are  not 
even  true  wealth.  They  are  mere  taxes  upon  wealth — in- 
struments by  which  tribute  can  be  exacted  from  wealth. 
We  are  now  considering  only  genuine  capital — true  wealth, 
employed  in  the  reproduction  of  wealth. 

In  the  next  place,  capital   necessarily  depends   for  its 


SOCIAL  EFFECTS  OF  NA  TURAL   TAXA  TION. 

profit  upon  a  large  demand  for  its  productions.  Modern 
capitalists  are  fully  aware  that  great  gains  can  never  come 
from  small  transactions,  no  matter  how  large  the  profit  on 
each  transaction  may  be.  Sales  of  $1,000,000  at  a  profit 
of  50  per  cent,  are  of  small  account,  compared  with  sales  of 
$100,000,000  at  a  profit  of  5  per  cent.  The  number  of 
those  who  live  without  their  own  labor  is  and  must  be  al- 
ways and  everywhere  so  small,  compared  with  the  vast 
mass  of  mankind,  as  to  afford  an  insignificant  market  for 
the  enormous  production  of  modern  industry.  The 
vast  majority,  who  .labor  with  their  own  hands,  furnish 
the  only  market  worthy  of  consideration  for  modern 
capital. 

This  great  majority  always  spend  the  larger  part  of  their 
earnings  ;  and  they  would  continue  to  do  so,  even  if  their 
earnings  were  doubled  or  trebled.  The  doubling  of  their 
wages  means,  therefore,  the  doubling  of  the  market  for 
the  joint  production  of  labor  and  capital.  It  means 
the  doubling  of  the  gross  profit  of  capital.  This  would 
not  be  true  of  a  similar  increase  of  income  to  any  other 
class.  The  owners  of  rent  would  not  double  their  pur- 
chases, if  rent  were  doubled.  They  would  put  much  of 
their  surplus  into  capital,  competing  with  capital  already 
invested.  This  might  be  good  for  others  than  capitalists. 
Yet,  unless  it  brought  about  an  increase  of  wages,  it  would 
not  increase  the  demand  for  goods ;  and  so  it  would  not 
increase  the  profit  of  capital.  An  increase  of  wealth,  in 
the  hands  of  the  few,  leads  to  increased  wastefulness  in 
the  nature  of  their  expenditures.  Their  outlay  does  not 
reproduce  capital.  The  outlay  of  the  working  classes 
does.  Not  only  does  their  food  renew  their  vigor,  but 
even  their  amusements,  when  intelligently  directed,  greatly 
increase  their  productive  power  and  energy.  High  wages 
lead  not  only  to  cheap  production,  but  also  to  a  vast  in- 


206  NATURAL    TAXATION. 

crease  of  production.  They  also  lead  immediately  to  a 
corresponding  increase  of  the  market  for  such  produc- 
tions. 

There  is  no  conflict  of  interest  between  labor  and  capi- 
tal ;  although  there  are  many  conflicts  of  interest  between 
individual  laborers  and  individual  capitalists.  The  lifting 
of  all  taxation  from  labor  and  capital  will  benefit  both. 

§  8.  Absolute  security  of  property.  When  taxation  is 
levied  exclusively  upon  ground  rent  every  man  will  have, 
for  the  first  time  in  human  history,  an  absolute  and  inde- 
feasible title  to  all  of  his  property  which  is  the  produc- 
tion of  human  skill  and  industry,  subject  only  to  the  right 
of  the  state  to  take  it,  upon  making  full  compensation  for 
its  value.  Such  compensation  would  enable  the  owner  to 
replace  the  property  thus  taken  with  other  property  of 
the  same  description  and  value.  This  general  right  of  the 
state  is  practically  no  limitation  upon  the  absolute  right 
to  individual  property. 

It  is  perfectly  plain  that  no  one  has  any  such  right  at 
present,  and  that  no  one  can  have  it,  under  any  existing 
system  of  taxation.  For,  so  long  as  the  state  assumes  the 
right  to  tax  any  thing  besides  rent,  it  is  impossible  for  any 
man  to  retain  the  entire  fruits  of  his  own  industry.  Every 
year  the  state  will  deduct  something  from  those  fruits, 
under  the  name  of  taxation  ;  and  no  one  can  ever  foresee 
precisely  how  much  will  be  taken  in  this  manner.  The 
fluctuations,  both  in  the  amounts  and  methods  of  such 
taxes,  are  so  great  and  incalculable,  that  no  one  can  have 
any  reasonable  certainty  as  to  the  extent  to  which  his 
earnings  will  be  secure  against  the  demands  of  the  state. 

But  if  taxes  were  once  confined  strictly  to  ground  rent, 
all  this  would  be  changed.  Chattels  of  every  description 
would  of  course  be  absolutely  secure  ;  since  the  only  rem- 
edy which  would  be  allowed  to  the  state  for  the  collec- 


SOCIAL  EFFECTS  OF  NA  TURAL   TAXA  TION.         2O/ 

tion  of  taxes  would  be  a  sale  of  some  exclusive  privilege 
on.  land.  But  buildings  and  all  other  improvements  on 
land  would  be  equally  secure  against  all  taking  without 
compensation.  This  is  not  at  first  sight  so  clear  ;  and  it 
needs,  therefore,  fuller  explanation. 

§  9.  Improvements  paid  for  our  tax  sales.  The 
exclusive  tax  upon  ground  rent  would  lose  its  entire 
character  if  the  state  were  allowed,  under  any  pretence, 
to  collect  it  from  personal  property  or  improvements. 
It  is  a  fundamental  condition  of  such  a  tax  that  it 
be  collected  only  out  of  rent.  It  must,  therefore,  when 
payment  is  refused,  be  collected  only  by  selling  the 
control  of  the  taxed  land  to  some  person,  who  will  not 
only  pay  the  tax,  but  will  also  pay  to  the  landholder,  thus 
sold  out,  the  full  value  of  all  his  improvements.  If  no 
one  will  pay  the  tax,  subject  to  those  conditions,  that  is 
conclusive  proof  that  the  tax  is  too  high,  and  that  it  is  in 
reality  based  upon  an  assessment  including  other  values 
than  the  mere  value  of  the  land.  The  purchaser  in  such 
case  would,  of  course,  take  the  land,  subject  to  the  annual 
liability  for  taxes  ;  but  he  would  also  acquire  the  same 
absolute  title  to  improvements  which  the  previous  pos- 
sessor had  ;  so  that  he,  in  turn,  could  not  be  sold  out  for 
taxes  without  full  compensation  for  improvements.  Thus 
no  one  would  ever  pay  taxes  upon  the  value  of  any  other 
property  than  the  bare  land. 

Universal  experience  has  demonstrated  that  there  would 
not  be  the  slightest  difficulty  in  carrying  such  a  system 
into  practical  operation.  This  system  has  long  been  in 
operation,  upon  a  great  scale,  both  in  public  and  private 
affairs.  Wherever  ferry  franchises  belong  to  a  munici- 
pality, as  in  the  city  of  New  York,  such  franchises  are 
sold  at  auction,  at  intervals  of  five  or  ten  years,  always 
subject  to  two  conditions:  first,  the  payment  of  rent  to 


2O8  NATURAL    TAXATION. 

the  municipality;  and  second,  the  payment  of  full  com- 
pensation to  the  former  holder  of  the  franchises,  for  boats, 
piers,  houses,  and  all  other  structures  and  materials  used 
in  operating  the  ferry.  Street  railroad  franchises  are  sold 
in  the  same  manner,  for  terms  of  years,  by  every  honest 
municipal  body  having  control  of  the  subject.1  So  land- 
lords constantly  lease  their  land  for  terms  of  years,  to  men 
who  erect  expensive  buildings  thereon  ;  the  landlords 
covenanting  to  pay  the  value  of  such  improvements  upon 
the  expiration  of  the  lease.  There  is  no  more  difficulty 
in  providing  for  an  annual  sale  of  land,  if  necessary,  sub- 
ject to  these  conditions,  than  there  is  in  providing  for  a 
sale  in  every  five,  ten,  or  twenty  years.  A  ferry  franchise 
is  just  as  much  a  title  to  "  land,"  within  the  meaning  of 
law,  science  and  common  sense,  as  is  any  other  land  title 
whatever.3 

Of  course  the  valuation  of  improvements  would  be 
made  upon  a  common-sense  basis.  The  land-owner,  upon 
making  default  in  taxes,  would  be  entitled  to  just  as  much 
compensation  for  his  buildings  as  those  buildings  really 
added  to  the  market  value  of  the  land  on  which  they  were 
built,  but  no  more.  If,  as  often  happens,  an  expensive 
building  had  been  put  up  in  a  district  where  it  could 
never  be  of  any  use,  nothing  should  be  allowed  for  it  be- 
yond the  value  of  its  materials^  after  it  had  been  pulled 
down.  But  for  any  really  useful  building,  compensation 
would  be  allowed,  sufficient  to  enable  the  owner  to  put  up 
a  similar  building,  in  similar  condition,  upon  an  adjoining 
tract  of  land.  In  short,  whatever  loss  the  owner  of  the 

1  The  conception  of  a  really  incorruptible  city  council  will  seem,  to  most 
American  readers,  too  wildly  improbable  for  the  basis  of  even  a  theory. 
But  effete  Europe  is  so  far  behind  us,  in  the  grand  march  of  civilization, 
that  such  Utopian  bodies  are  quite  common  there.;  and  the  method  of  the 
text  is  common  also. 

2  Benson  v.  New  York,  10  Barbour,  223.  233. 


SOCIAL  EFFECTS  OF  NA  TURAL   TAXA  TION.         2OQ 

building  incurred,  by  reason  of  his  own  mistakes  or  ex- 
travagance, he  would  be  left  to  bear ;  but  whatever  value 
belonged  to  the  building,  exclusive  of  the  land  under- 
neath it,  he  would  invariably  be  allowed  to  retain. 

§  10.  The  railway  problem.  This  is  no  place  for  even 
a  full  statement  of  the  great  railway  problem,  with  its 
almost  endless  branches.  Much  less  will  an  attempt  be 
here  made  to  give  it  a  complete  solution.  All  that  will 
be  attempted  is  to  suggest  the  close  connection  between 
this  complicated  problem  and  the  simple  one  of  taxation. 

It  is  by  no  means  so  clear  as  it  seems  to  those  who 
suffer  from  them,  that  high  railway  rates  are  actually 
unjust.  That  which  is-  unjust  in  such  cases  is  generally 
the  fact  that  the  large  profits  made  upon  such  transac- 
tions are  in  the  nature  of  rent,  and  equitably  belong  to 
the  whole  community.  All  attempts  to  correct  this 
apparent  injustice  have  thus  far  failed ;  and  it  may  be 
worthy  of  inquiry  whether  this  failure  is  not  caused  by 
some  unrecognized  justice  in  the  system  complained  of. 
May  it  not  be,  that  the  wrong  consists,  not  in  the  differen- 
tial rates,  but  in  the  failure  of  the  government  to  collect 
any  part  of  these  differences  for  public  use? 

Are  not  many  of  the  evils  complained  of  due  to  inflated 
nominal  values  and  fictitious  securities  ?  That  such  is 
the  general  opinion,  is  strongly  indicated  by  the  stringent 
prohibition  of  fictitious  stocks  and  bonds,  in  the  new 
constitutions  of  Illinois,  Pennsylvania,  and  other  States, 
as  well  as  in  the  statutes  of  still  more.  But  if  this  opin- 
ion is  well  founded,  the  concentration  of  taxes  upon  land 
privileges,  including  railway  franchises,  will  practically 
settle  that  question,  by  taking  a  very  large  part  of  such 
inflated  values  for  public  use. 

The  complete  separation  between  the 'ownership  of  the 
road  and  the  ownership  of  moving  stock,  proposed  by 


2IO  NATURAL    TAXATION. 

Mr.  Hudson,  '  would  seem  to  cover  all  the  remaining 
ground.  Under  the  one  natural  tax,  the  owners  of  the 
road  would  be  taxed  in  proportion  to  the  value  of  its 
franchise  ;  but  the  owners  of  rolling  stock  would  not  be 
taxed  at  all.  All  persons  and  corporations  could  operate 
trains  upon  the  road,  subject  to  general  rules.  If  the 
people  of  any  place  were  charged  too  much  for  the  car- 
riage of  their  persons  or  property,  they  could  put  their  own 
trains  upon  the  road,  on  equal  terms  with  all  others. 
This  was  the  original  railway  idea  ;  and  it  has  been  aban- 
doned, not  because  it  is  really  impracticable,  as  railway 
managers  pretend,  but  because  it  is  less  profitable  to 
railway  companies  than  the  monopoly  which  is  created 
by  the  present  system. 

§  ii.  Just  taxation  the  remedy  for  unjust  appropria- 
tion. The  proposal  of  a  method  of  just  scientific,  and 
natural  taxation  is  so  simple  and  unpretending,  that  eager 
social  reformers  cannot  believe  it  possible  that  it  can  carry 
with  it  any  cure  for  the  evils  of  our  time.  They  point  to 
the  unequal  distribution  of  wealth,  the  growth  and  powers 
of  monopolies,  the  watered  stocks  and  bonds,  the  bribe- 
bought  franchises,  the  usurped  privileges,  the  stolen  lands, 
the  wholesale  appropriation  of  public  property  to  private 
use ;  and  they  ask  how  it  can  be  possible  that  "  a  mere  fis- 
cal reform  "  can  bring  relief  from  any  of  these  evils.  Yet 
it  can.  No  great  upheaval  of  society  is  needed.  No  social 
re-organization  is  required.  No  general  state  assumption 
of  the  machinery  of  production  is  either  necessary  or 
desirable. 

It  is  continually  but  erroneously  denied  that  the  enor- 
mous fortunes  of  the  present  day  are  due  to  land  monop- 
oly or  to  methods  of  taxation.  Fortunes  of  considerable 

1  The  Railways  and  the  Republic. 


SOCIAL  EFFECTS  OF  NA  TURAL  TAXA  TION.         2 1 1 

extent  are  gained  by  skill  and  genius;  and  there  is  no 
good  reason  why  such  fortunes  should  not  be  encouraged. 
Bessemer,  Edison,  Bell  and  other  inventors  have  deserved 
wealth  ;  and  the  capitalists,  who  made  their  inventions 
possible  and  forced  them  upon  public  attention,  deserve 
it  too.  But  all  the  unwieldy  fortunes,  and  all  which  have 
had  an  undesirable  origin,  owe  their  existence  to  some 
form  of  monopoly,  which  could  not  have  existed  under 
the  natural  system  of  taxation. 

The  enormous  wealth  of  British  dukes  and  of  our  own 
—or  lately  our  own — Astors,  is  of  course  due  entirely  to 
the  comparative  exemption  of  ground  rents  from  taxa- 
tion. But  all  the  excess  of  wealth  gained  by  railway 
kings,  above  a  liberal  compensation  for  shrewdness, 
sagacity,  and  foresight,  is  due  to  precisely  the  same  cause. 
It  has  been  shown  that  the  chief  value  of  railways  con- 
sists in  exclusive  and  peculiar  privileges  upon  land  ;  and 
the  greatest  part  of  this  value  arises  from  its  compar- 
ative exemption  from  taxation. 

The  great  monopolies,  which  have  grown  with  such 
startling  rapidity,  into  such  overshadowing  power,  owe 
all  their  wealth  and  power  to  their  manipulation  of  rail- 
ways and  of  duties  on  imports.  Under  natural  taxation 
there  would  be  no  import  duties  to  manipulate;  and  rail- 
ways could  not  afford  to  be  manipulated. 

§  12.  "  Watered  stocks."  Let  us  pass  to  the  consid- 
eration of  the  inflated  stocks  and  bonds,  which  are  made 
the  excuse  for  extortion.  What  can  taxation  do  with 
them  ?  The  answer  is  so  plain  that  one  wonders  at  the 
question.  Even  without  the  adoption  of  the  full  reform 
here  proposed,  the  change  of  a  few  lines  in  the  tax  laws 
would  put  a  speedy  end  to  these  abuses.  If  all  corporate 
securities  were  made  subject  to  the  general  tax  rate,  at 
their  full  nominal  value,  the  "  water"  would  be  let  out  of 


212  NATURAL    TAXATION. 

them  within  three  months.  "  Yet  show  I  unto  you  a 
more  excellent  way." 

Stock  inflation  does  not  really  enable  railways  to  charge 
high  rates.  The  Erie  line  cannot  charge  more  on  through 
traffic  than  the  Central.  And,  upon  the  whole,  those  who 
use  railways  do  not  pay  more  than  the  service  is  worth. 
The  real  evil  is  that  a  very  great  part  of  the  value  of  such 
service  consists  in  the  use  of  the  land  over  which  the  rail- 
way runs,  that  this  portion  belongs  to  the  public,  and  that 
hardly  any  of  it  is  taken,  as  it  ought  to  be,  for  public  use. 
The  proper  remedy  is  not  to  give  service  to  those  who 
use  the  railways,  for  less  than  it  is  worth,  but  to  use  the 
same  share  of  the  value  of  railway  land  for  public  pur- 
poses, as  in  the  case  of  other  lands.  When  this  is  done, 
the  entire  people  will  receive  through  relief  from  other 
taxation  their  share  of  the  value  which  they  have  given 
to  the  railways.  And,  at  the  same  time,  it  will  become 
impossible  for  railway  companies  to  maintain  inflated 
stocks  and  bonds  ;  because  to  do  so  would  be  to  invite 
greater  taxation  than  they  could  bear. 

§  13.  Corrupt  grants.  So  as  to  bribe-bought  fran- 
chises. It  would  be  quite  unnecessary  to  rescind  them. 
It  would  only  be  necessary  to  tax  them  on  the  basis 
of  their  true  value,  which  is  pure  ground  rent.  Thus 
American  street  railroads,  which  generally  owe  their 
franchises  to  the  grossest  corruption,  and  which  charge 
fares  of  five  or  ten  cents  for  a  service  which  costs  less 
than  half  that  sum,  need  not  be  interfered  with.  Under 
a  proper  system  of  taxation,  it  would  make  little  differ- 
ence whether  the  fares  were  reduced  or  not.  If  the  fares 
were  reduced  to  three  cents,  ground  rents  would  be  in- 
creased, and  the  city  would  derive  greater  revenue  from 
its  taxes  on  those  rents.  If  the  fares  remain  unchanged, 
the  value  of  the  railroad  franchise  would  be  so  much 


TJNIVERSIT1 
SOCIAL  EFFECTS  OF  NA  TURAL   TAX  A  TIO 

greater,  and  the  tax  upon  that  would  be  greater  in  pro- 
portion. It  would  make  little  difference,  even  to  those 
who  travelled  in  the  cars.  If  the  fares  were  reduced,  the 
travellers  would  have  to  pay  more  rent  for  their  homes. 
Thus  they  would  contribute  as  much  to  the  public  funds 
in  one  way  as  in  the  other. 

At  first  sight  it  would  seem  that  the  redress  thus  ob- 
tained would  be  very  inadequate.  But  it  would  not.  Of 
course,  no  past  wrong  can  be  entirely  obliterated.  No 
scheme  of  social  reform  seriously  proposes  to  secure  com- 
pensation for  all  the  past.  The  world  does  not  contain 
wealth  enough  to  pay  damages  for  all  past  injuries.  But 
the  taxation  of  all  franchises,  on  the  basis  of  their  present 
fair  market  value,  with  the  concentration  of  all  taxes  upon 
ground  rents,  of  which  these  are  a  part,  would  take  for 
the  public  benefit  all  that  the  public  could  have  secured, 
under  the  most  honest  and  impartial  sale  of  such  fran- 
chises. It  will  also  tax  those  corporations  which  obtained 
their  grants  for  nothing,  just  so  much  more  than  it  will 
tax  those  which  paid  a  fair  price. 

§  14.  Taxation  the  best  remedy  for  past  corruption. 
For  these  franchises  could  not,  upon  the  average,  have 
been  originally  sold  for  more  than  they  would  now  pay 
under  such  taxation.  If  they  had  been  sold  at  auction, 
for  a  sum  in  cash,  free  of  taxation,  they  would  never  have 
brought  a  sum  which,  however  well  invested,  would  pro- 
duce an  income  equal  to  the  average  annual  tax.  If  new 
franchises  should  be  sold,  free  of  taxation,  to  the  highest 
bidder  for  an  annual  payment,  that  payment,  in  the  long 
run,  would  rarely,  if  ever,  equal  the  taxes  which  would 
be  paid  under  this  system.  Therefore  it  would  be  better, 
in  the  long  run,  to  give  these  franchises  to  the  corpora- 
tions which  will  give  the  best  security  for  the  best  and 
cheapest  public  service,  than  to  sell  them  to  the  highest 


214  NATURAL    TAXATION. 

bidder,  either  for  a  single  or  an  annual  payment.  Indeed, 
to  sell  them  for  a  single  present  payment  is  obviously  a 
bad  method.  It  confines  competition  to  a  very  few  men 
of  great  wealth,  depriving  the  municipality  of  the  better 
service,  which  less  wealthy  but  more  energetic  men  would 
probably  render ;  it  cripples  the  operation  of  the  fran- 
chise by  impairing  the  capital  of  the  managers ;  and  it 
pours  into  the  public  treasury  a  large  sum,  which  cannot 
be  well  invested,  and  which  is  an  almost  irresistible 
temptation  to  extravagance  and  waste. 

And  those  corporations  which  have  obtained  valuable 
franchises  for  nothing,  except  bribes,  will  necessarily  be 
taxed  more  heavily  than  those  which  are  already  subject 
to  an  annual  payment.  Thus  the  Broadway  Railroad,  in 
New  York  city,  is  subject  to  an  annual  payment  of  $40,- 
ooo.  The  real  annual  value  of  its  franchise  (obtained  by 
paying  aldermen  $20,000  each)  is  so  much  more  than 
$400,000,  that  this  figure  may  be  taken,  as  an  extremely 
moderate  one.  Assuming  that  to  be  correct,  the  taxable 
value  of  this  franchise  would  be  reduced  to  $360,000, 
by  this  liability  to  an  annual  payment.  If  another 
charter,  equally  valuable,  should  be  granted  in  a  parallel 
street,  for  nothing,  its  taxable  value  would  be  the  full 
$400,000.  Supposing  half  of  such  values  to  be  taken  by 
taxation,  half  the  amount  gained  by  bribery  would  be 
recovered.  Under  the  present  system,  every  conceivable 
method  for  recovering  the  loss  sustained  by  the  commu- 
nity through  such  schemes  of  corruption  has  been  tried, 
without  the  slightest  success.  Even  if  .the  adoption  of 
just  taxation  should  only  recover  half  of  a  just  compensa- 
tion for  the  franchises  corruptly  given  away,  that  is  a 
thousand  times  more  than  has  ever  yet  been  recovered, 
and  ten  times  more  than  ever  can  be  recovered  in  any 
other  way. 


SOCIAL  EFFECTS  OF  NATURAL   TAXATION.         21$ 

§  15.  Usurped  lands.  Take  the  case  of  usurped  or 
stolen  lands.  In  Great  Britain,  the  lords  of  the  manor, 
having  had  control  of  Parliament  for  centuries,  have 
stolen  vast  quantities  of  land  from  the  people,  under  the 
forms  of  law.  In  the  United  States,  vast  tracts  of  land 
have  been  taken  up,  under  forged  grants  or  under  per- 
jured testimony.  Spanish  grants  are  a  by-word  ;  and  the 
homestead  law  has  been  perverted  into  the  most  success- 
ful scheme  for  buying  government  land  at  a. fourth  of  its 
value,  which  could  have  been  devised.  It  ought  to  be 
entitled :  "  An  Act  to  prohibit  the  purchase  of  land  by 
honest  men,  and  to  encourage  monopoly  and  perjury." 
Railroad  lands,  to  the  amount  of  hundreds  of  millions  of 
acres,  have  been  obtained  for  nothing,  except  a  few  beg- 
garly bribes  to  Congressmen  and  State  legislators,  amount- 
ing in  all  to  less  than  a  ten  thousandth  part  of  the  market 
value.  What  then?  Shall  we  sue  in  the  courts  for  relief? 
None  could  be  had,  without  laying  down  rules  of  law, 
which  would  be  ruinous  to  innocent  purchasers,  all  over  the 
land.  Shall  we  pass  confiscatory  laws?  The  Constitution 
forbids  ;  and  if  it  did  not,  our  own  consciences  would  revolt 
at  the  idea.  There  is  no  possible  relief  in  that  direction. 

Great  Britain  has  no  written  constitution  ;  and  her  Par- 
liament has  unlimited  power.  Shall  Parliament  direct  the 
confiscation  of  the  old  common  lands  ?  Shall  it  under- 
take to  reclaim  literal  possession  of  "the  land  for  the 
people"  ?  Let  us  not  waste  time  in  discussing  the  ques- 
tion on  moral  grounds.  Rightly  or  wrongly,  the  moral 
sense  of  the  people  would  revolt  at  such  a  proposition. 
And  if  it  did  not,  yet  the  immense  complications  involved 
in  awarding  compensation  for  improvements  would  break 
down  the  whole  project.  It  is  not  worth  while  to  in- 
quire into  the  abstract  morality  of  an  utterly  impractica- 
ble scheme. 


2l6  NATURAL    TAXATION. 

But,  in  Great  Britain  and  America  alike,  the  adoption 
of  a  just,  natural,  and  uniform  method  of  taxation  would 
give  an  immediate  remedy.  Without  confiscation,  with- 
out violence,  without  any  social  upheaval,  it  would  take 
for  public  use  about  half  of  the  revenue  thus  misappro- 
priated, which  is  no  more  than  ought  to  be  taken,  in  any 
case  ;  while  it  is  far  more  than  can  ever  be  obtained  in 
any  other  way. 

"The  best  remedy  for  injustice  is  simple  justice." 

§  16.  Reform  in  government.  By  this  time,  it  is 
hoped,  the  attentive  reader  will  have  begun  to  see  that 
the  adoption  of  natural  taxation  leads,  by  an  easy  course, 
to  reform  in  all  methods  of  government  and  the  abolition 
of  corruption  in  public  office,  by  removing  most  induce- 
ments to  corruption.  It  would  nearly  extirpate  the  bribery 
of  legislatures  and  councils,  by  leaving  nothing  for  any  one 
to  gain  by  offering  bribes.  Not  absolutely,  of  course.  It 
cannot  be  too  often  repeated,  that  nothing  in  this  world 
is  or  ever  will  be  perfect.  But  this  reform  in  taxation 
would  remove  most  of  the  present  inducements  to  brib- 
ery, falsehood  and  fraud  in  public  affairs. 

§  17.  Abolition  of  fraud  and  bribery  in  tax  matters. 
The  most  prolific  sources  of  these  evils  are  directly 
connected  with  bad  methods  of  taxation.  Every  change 
in  laws  imposing  taxes  upon  commodities,  either  by  a 
tariff  or  by  excises,  affects  so  many  private  interests 
that  all  parties  agree  in  charging  wholesale  bribery  and 
corruption  upon  each  other,  and  none  seriously  claim  to 
be  innocent.  This  branch  of  the  subject  has  already  been 
sufficiently  treated.  The  innumerable  frauds  and  perju- 
ries which  arise  out  of  the  taxation  of  personal  property 
have  also  been  referred  to.  All  these  abominations  would 
disappear,  with  the  acceptance  of  natural  taxation.  No- 
body would  be  required  to  make  any  return  of  his  wealth  \ 


SOCIAL  EFFECTS  OF  NATURAL   TAXATION.         2 1/ 

and  no  attention  would  be  paid  to  it,  if  he  made  any. 
There  would  be  but  one  thing  to  be  taxed  ;  and  its  value 
would  be  ascertained  by  independent  investigation.  Valu- 
ations of  land  might  be  compared  with  the  rents  actually 
paid;  but  those  rents  would  be  learned  by  inquiry  among 
tenants,  not  among  landlords.  Large  land-owners  might 
attempt  to  bribe  assessors,  as  they  do  now.  But  the 
value  of  land  is  so  easily  determined,  that  other  land- 
owners could  be  provided  with  an  ample  remedy,  in  an 
application  to  the  courts  to  make  assessments  just  and 
uniform. 

§  18.  Special  local  assessments  dispensed  with. 
The  complex  system  of  special  assessments  for  local 
improvements,  which  is  indispensable  under  all  existing 
methods  of  taxation,  with  its  allowance  for  "  better- 
ments," to  use  a  current  English  term,  would  become 
unnecessary.  All  improvements  could  be  made  at  the 
common  expense ;  because  whatever  improvement  might 
thus  be  made  in  the  value  of  adjoining  property  would 
all  be  an  increase  in  the  value  of  the  mere  land  ;  and  this 
addition  would  lead  at  once  to  a  permanent  increase  in 
the  tax  upon  that  land,  to  a  proportionate  amount.  Such 
assessments  have  always  been  a  fertile  source  of  injustice, 
inequality,  and  fraud.  They  are,  inevitably,  largely  based 
upon  guesswork  ;  whereas  the  subsequent  taxation  would 
be  measured  by  actual,  known  values. 

§  19.  Bribery  made  unprofitable.  The  most  appalling 
developments  of  crime  in  American  government,  how- 
ever, have  taken  place  with  regard  to  the  grants  of  special 
privileges  on  land,  especially  to  railway,  gas,  electric  light, 
and  similar  companies.  The  notorious  robbery  of  the 
United  States  by  the  Union  Pacific  and  Central  Pacific 
companies,  to  an  amount  exceeding  $100,000,000,  is  only 
one  of  many  instances,  although  the  most  prominent  one. 


218  NATURAL    TAXATION. 

The  repeated  purchase  of  the  Broadway  Railroad  fran- 
chise from  corrupt  aldermen  and  legislators,  repeatedly 
set  aside  by  the  courts,  has  attracted  more  attention 
than  hundreds  of  similar  crimes.  But  every  street  railroad 
franchise  in  New  York  has  certainly  been  procured  in 
precisely  the  same  way  ;  and  probably  every  such  railroad 
in  the  country,  the  franchise  of  which  was  worth  anything, 
was  chartered  upon  similar  terms.  Gas  companies,  elec- 
tric light  companies  and  steam  heating  companies,  all  pay 
heavy  bribes  for  permission  to  lay  their  pipes  or  wires  in 
city  streets. 

The  taxation  of  all  these  franchises,  at  their  full  value, 
on  the  same  basis  with  other  privileges  over  land,  would 
make  it  impossible  to  obtain  them  for  nothing.  No  bar- 
gains with  aldermen  could  relieve  them  from  paying  hand- 
somely for  their  annual  value.  There  would  no  longer 
be  an  eager  crowd  of  bribe-offerers  ;  and  therefore  the  crowd 
of  bribe-takers  would  cease  to  buy  their  way  into  munici- 
pal government.  The  bribes  offered  to  aldermen  would 
be  too  small  to  repay  the  aldermen's  bribes  to  their 
electors.  Such  franchises  would  be  generally  given  to 
those  who  would  accept  them  on  terms  most  favorable  to 
the  public,  with  respect  to  low  charges,  good  accommoda- 
tion, and  faithful  service.  No  money  would  be  paid, 
either  to  the  municipality  or  to  the  aldermen  ;  for  taxes 
would  have  to  be  paid  ;  and  they  would  automatically 
increase,  as  the  value  of  the  franchises  increased. 

§  20.  The  tenement  house  problem.  The  rapid 
increase  of  low-class  tenement  houses  in  large  American 
cities,  especially  in  New  York,  has  excited  the  just  anxiety 
and  alarm  of  our  most  thoughtful  citizens.  Many  plans 
of  restriction  and  regulation  are  urged.  They  all  aim  at 
results  which  are  eminently  desirable.  But  they  all  in- 
volve large  expenses,  which  must  be  finally  borne,  under 


SOCIAL  EFFECTS  OF  NATURAL   TAXATION.         2IQ 

our  present  methods  of  taxation,  by  the  very  tenants 
whose  extreme  and  degrading  poverty  is  the  very  cause 
of  the  difficulty.  It  is  perfectly  true  that  such  houses  do 
not  afford  sufficient  space  and  air  to  sustain  health.  It  is 
often  true  that  they  do  not  furnish  accommodations  neces- 
sary to  maintain  decency ;  although  much  has  been  done 
of  late  years  to  improve  them  and  to  keep  them  under 
careful  inspection.  But  every  good  thing  is  costly ;  and 
who  is  to  pay  the  cost  ?  If  the  landlord  is  forced  by  law 
to  provide  better  accommodations,  he  must  charge  more 
rent  for  the  house  ;  and  it  has  been  already  shown  that 
he  can,  in  the  long  run,  compel  the  payment  of  such  addi- 
tional rent ;  because,  if  he  could  not,  no  more  tenement 
houses  would  be  built  until  tenants  were  able  and  willing 
to  pay  a  fair  rate  of  interest  upon  all  the  cost  of  building 
such  houses,  including  all  compulsory  improvements. 

Or  suppose  that  the  cost  of  such  improvements  is 
paid  by  the  government.  The  expense  would  be  paid 
out  of  taxes.  Who  would  pay  the  taxes  ?  A  full  share 
would  fall  upon  these  very  houses ;  and,  as  the  cost  of 
such  improvements  when  made  by  the  city  would  be  far 
greater  than  it  would  be  if  they  were  made  by  the  land- 
lord, the  probability  is  that  the  tax  upon  the  class 
of  houses  thus  State-repaired  would  be  nearly  as  great  as 
the  cost  of  private  repair  would  be.  Be  it  more  or  less, 
this  tax  must  be  finally  paid  by  the  tenants.  And  in  this 
event,  a  large  share  of  the  tax  would  fall  upon  other 
buildings,  occupied  by  a  class  but  little  less  poor  than  the 
occupants  of  tenement  houses  ;  and  thus  they  would  be 
dragged  down  into  actual  poverty. 

The  next  result  would  be  that  the  tenement  dwellers 
would  be  so  impoverished  by  the  increase  of  their  rents, 
as  to  deprive  them  of  some  portion  of  the  food  or  cloth- 
ing, which  tney  had  with  difficulty  managed  to  provide 


220  NATURAL    TAXATION. 

under  the  original  rent.  All  of  them  would  suffer 
inconvenience  ;  most  of  them  would  suffer  actual  priva- 
tion ;  their  earning  power  would  be  reduced  ;  and  many 
of  them  would  be  driven  out  altogether,  by  the  bidding 
of  other  tenants,  who  had  previously  occupied  houses  or 
parts  of  houses  of  a  slightly  higher  grade,  which  they  had 
been  compelled  to  give  up  by  the  pressure  of  taxation,  or 
which,  while  they  were  much  better  than  the  tenements 
had  been  before  tenements  were  reformed,  were  no  better 
than  the  reformed  and  improved  tenements. 

Any  compulsory  improvements  of  this  kind  must  in- 
evitably make  the  lot  of  the  lower  class — the  "  residuum," 
as  it  is  called — harder  than  ever. 

As  usual,  it  will  be  said  that  "  this  is  all  theory."  Un- 
fortunately it  is  a  theory  which  was  never  much  thought 
of,  until  practical  experience  called  attention  to  it.  The 
dwellings  of  the  poor  have  been  torn  down  and  rebuilt 
with  improvements,  upon  a  large  scale,  in  Paris,  London, 
Berlin  and  other  cities,  and  always  with  precisely  these 
results.  Those  who  occupied  the  old,  condemned  build- 
ings did  not  return  to  the  new  ones.  They  simply  could 
not  afford  it.  Their  places  were  taken  by  others,  who 
had  always  occupied  rather  better  homes,  and  who  were 
driven  by  increased  taxation  to  descend  a  step  in  the 
social  scale,  finding  in  the  new  dwellings,  homes  not  quite 
equal  to  their  old  abodes,  but  much  better  and  more  ex- 
pensive than  the  buildings  which  had  been  destroyed  as 
unhabitable.  The  "  residuum  "  were  driven  into  more  de- 
graded conditions  than  those  under  which  they  previously 
lived. 

§  21.  Its  solution.  Must  we  then  abandon  all  hope  of 
improvement  in  the  homes  of  the  poor?  Not  at  all. 
While  insisting  upon  renovations  and  necessary  improve- 
ments, let  us  remove  all  taxes  from  Jiouscs*  This  will 


SOCIAL  EFFECTS  OF  NATURAL   TAXATION.         221 

make  houses  more  abundant ;  this  will  make  house  rents 
cheaper ;  this  will  enable  house  owners  to  furnish  necessary 
improvements,  without  increasing  rents  or  losing  interest 
on  their  investments. 

Let  us  work  out  an  illustration.  Twenty  thousand 
dollars  is  a  reasonable  estimate  for  the  price  of  many 
tenement  houses  in  New  York ;  half  for  the  house  and 
half  for  the  land.  Houses  being  usually  assessed  for  70 
per  cent,  of  their  full  value,  the  house,  as  distinguished 
from  the  land,  would  be  assessed  at  $7000,  and  taxed, 
at  present  rates,  $133.  If  this  tax  were  taken  off,  repre- 
senting, as  it  does,  a  capital  of  about  $2600,  the  owner 
could  afford  to  spend  $2000  on  improvements  without 
raising  the  rent,  and  yet  make  a  profit.  Competition  with 
other  house  owners  would  eventually  compel  him  either 
to  spend  about  as  much  or  else  to  reduce  his  charge  for 
the  house  by  more  than  $100  a  year.  Legislation  might 
hasten  his  action  or  require  him  to  make  the  improve- 
ments, instead  of  lowering  his  rent.  In  either  case  the 
tenants'  condition  would  be  greatly  improved. 

Without  deciding  that  no  other  reform  is  necessary  or 
desirable,  it  is  at  least  demonstrated  by  long  and  wide 
experience  that  no  permanent  and  complete  reform  of  the 
tenement  house  is  possible,  without  first  abolishing  all 
taxes  on  Buildings. 

§  22.  Summary  of  conclusions.  The  adoption  of 
natural  taxation  would  obviously  relieve  the  great  mass 
of  the  people  from  all  taxes  and  tax-burdens  whatever, 
except  rent  ;  which  they  now  pay,  in  addition  to  taxes. 

It  would  put  an  end  to  that  artificial  concentration  of 
wealth  in  the  hands  of  a  few,  which  is  now  making  such 
rapid  progress. 

While  leaving  natural  inequalities  in  human  skill,  in- 
telligence, industry,  and  productive  power  to  produce  their 


222  NATURAL    TAXATION. 

natural  effects,  in  moderate  inequalities  of  wealth,  it  would 
gradually  remove  those  unnatural  and  monstrous  inequali- 
ties which  now  exist,  with  no  benefit  to  any  one  and  with 
vast  injury  to  society  as  a  whole. 

It  would  put  a  premium  upon  improvement  and  in- 
dustry, by  relieving  them  from  double  taxation  ;  while 
it  would  lay  such  burdens  upon  mere  "  dogs  in  the 
manger,"  as  would  drive  them  into  productive  industry. 

It  would  secure  to  the  owner  of  every  product  of  human 
industry  and  skill  an  absolute  and  indefeasible  title  to 
such  property  ;  so  that  it  could  not  be  taken  from  him, 
even  for  taxes,  without  full  compensation  for  its  market 
value  ;  a  title,  therefore,  far  superior  to  any  which  can  now 
be  held  by  any  human  being. 

It  would  increase  the  demand  for  human  labor  in  the 
production  of  good  things  for  Jhuman  use,  to  the  utmost 
possible  limit  ;  thus  causing  a  general  rise  in  wages  of  at 
least  50  per  cent,  and  more  probably  100  per  cent. 

It  would  relieve  wages  from  all  present  forms  of  taxa- 
tion ;  thus  increasing  the  net  income  of  laborers,  at  once 
and  forever,  by  at  least  15  per  cent.  more.  Whether 
" times"  were  good  or  bad,  wages  high  or  low,  the  net 
income  of  every  laborer  would  always  be  at  least  15  per 
cent,  higher  than  it  could  possibly  be  under  the  present 
system,  at  similar  periods. 

It  would  encourage  capital  to  free  investment,  by  re- 
lieving it  from  all  fear  of  punishment  for  enterprise,  under 
the  name  of  taxation. 

It  would  solve  the  American  currency  problem,  by 
opening  banks  of  deposit  in  every  nook  and  corner,  free 
of  taxation  ;  thus  giving  to  every  farmer  precisely  the 
same  facilities  for  exchange  as  are  enjoyed  by  the  wealth- 
iest merchant  or  manufacturer,  and  making  a  large  supply 
of  either  coin  or  notes  superfluous. 


SOCIAL  EFFECTS  OF  NATURAL    TAXATION.         22$ 

It  would  largely  reduce  the  share  of  taxes  paid  by 
farmers,  because  their  share  of  ground  rent  is  smaller  than 
is  that  of  other  land  owners  ;  while  it  would  not  increase 
the  present  burdens  upon  residents  of  towns  and  cities, 
since  they  would  pay  nothing  but  rent ;  and  that  they  pay 
now,  in  addition  to  taxes. 

It  would  remove  all  shackles  from  commerce,  trade, 
manufactures,  agriculture,  and  industry  of  every  kind, 
giving  them  a  stimulus  such  as  they  have  never  known. 

It  would  throw  open  to  all  men  some  land,  upon  which 
they  could  make  a  living,  without  requiring  them  to  in- 
vest any  capital  in  its  purchase,  and  at  no  greater  rent 
than  they  could  reasonably  afford  to  pay. 

It  would,  therefore,  enormously  increase  the  production 
and  wealth  of  the  nation,  while  securing  a  fair,  though  not 
literally  equal,  distribution  of  that  wealth. 

It  would  reform  government,  by  lifting  the  masses  out 
of  the  degrading  conditions  which  make  them  an  easy 
prey  to  corrupt  influences,  by  removing  all  temptation  to 
fraud  in  matters  of  taxation,  and  by  destroying  the  chief 
inducements  to  the  corruption  of  legislatures  and  councils. 

It  would  not  at  once  make  men  moral,  industrious,  or 
intelligent;  it  would  not  give  to  any  man  a  dollar  which 
he  did  not  earn  for  himself ;  it  would  not  open  any 
"  royal  roads"  to  wealth  ;  for  "  royal"  ways  are  ways  of 
idleness. 

But  it  would  open  fair  and  equal  opportunities  to  men 
of  equal  capacity  and  industry ;  and  it  would  remove 
nearly  all  artificial  hindrances  to  the  success  of  the  honest, 
intelligent,  and  industrious. 


INDEX. 


Ad  valorem  taxes,  22 

Andrews,  George  H.,  75 

Argyll,  Duke  of,  129 

Assessment,  of  personal  property,  how  made,  63-69 

of  merchandise,  64,  65-68 

of  furniture,  64,  65 

by  donkey  race,  69 

methods  in  Rhode  Island  and  Rome,  69 

of  buildings  and  improvements,  110-114 

of  ground  rent,  121 

of  unimproved  value  of  farm  lands,  122 

judicial  correction  of,  123 

correction  of,  by  sales,  123,  124 

of  franchises,  125-128 

now  omitted,  154,  155 

for  local  improvements,  217 
Astor  family,  166,  211 
Astor,  Mrs.  W.  W.,  commended,  20 
Atkinson,  Edward,  137,  139,  152,  154 

on  Boston  rents,  137,  152,  154 
Automatic  taxation,  115 

Bad  taxation,  effects  of,  3,  4 

what  is,  4,  5 

causes  currency  trouble,  60-62 
Bank  deposits,  not  money,  57 

mere  credits,  57 
15  225 


226  INDEX. 

Banks,  taxation  of,  60-62 

a  success,  60 

a  disaster,  60 

cause  of  currency  troubles,  60—62    - 
scarce  in  Southwest,  61 
abundant  in  Scotland  and  Canada,  62 
Boston,  personal  property  tax  in,  81-83 
ground  rent  in,  137,  138,  152-157 
taxes  in,  138,  152,  153,  156 
Bribery.     See  Corruption 
Brooklyn,  income  tax  in,  31 
taxes  on  houses  in,  in 

Buildings,  taxes  on,  106-114.     See  Improvements 
Burden  of  taxation,  under  present  system,  24-27 

private  profits,  24—27 

amount  of,  27 

where  it  falls,  35 
on  personal  property,  63-69,  75,  78,  84-87,  88-105 

of  farmers,  63-65,  84-100.     See  Farmers 

of  merchants,  64-68.     See  Merchants 

of  women  and  children,  101—105.     See  Women 
on  buildings  and  improvements,   113,  114 

of  farmers,  185-198 
under  natural  system,  174-198 

amount  of,  174 

on  landless,  177 

on  land-owners,  177-182 

on  vacant  lands,  182 

on  farmers,  182-194.     See  farmers 
See  Incidence  of  taxation 

California,  taxation  in,  76-81 

no  butter,  wool,  or  honey  in,  77 
money  leaving,  77,  79 
assessments  in,  79,  80,  122 
merchandise,  bonds,  and  credits  in,  80 


INDEX.  227 

California,  failure  of  personal  property  tax  in,  76-78 

original  government  and  taxation  in,  167 
Capital,  effect  of  natural,  taxation  on,  204-206 
Chattels,  what  are  ?  50 

visible,  taxation  of,  62-69 

farmers  hold  most,  63-65 
assessment  of,  64-69 
Chicago,  unequal  assessments  in,  113 
Class  legislation,  169 

Collection  of  taxes,  methods  iniquitous,  18-22 
use  of  spies  in,  19,  22 
enormous  penalties  in,  19,  22 
Compensation,  for  taxation,  170 

for  vested  rights,  171-173 
Concentration  of  wealth,  how  progressing,  36 

how  caused,  37 
Confiscation,  169 

Connecticut,  rent  and  taxes  in,  150-152 
Consumers,  of  sugar,  taxed,  12 

of  whisky,  12 
Corruption,  political,  16-18 

result  of  crooked  taxation,  9,  13,  15-18 
by  whisky  trust,  16,  18 
by  sugar  trust,  16 
natural  taxation  best  remedy  for  past,  213,  214 

best  guaranty  against  future,  216-218 
Credits,  can  wealth  be  increased  by  ?  50-52 
taxation  of,  50-56 

useless  labor,  52,  53 
corporate,  53 
individual,  55 
how  evaded,  53,  54,  56 
Crooked  taxation,  6-38 
defined,  9,  10 
general  effects  of,  6-8 
profits  of,  7 


228  INDEX. 

Crooked  taxation,  heavy  on  poor,  8 
light  on  rich,  8 
on  sugar  and  whisky,  n,  12 
promotes  waste,  8,  13 
difficulty  of  regulating,  14,  15 
political  corruption  from,  16-18 
iniquitous  methods  of  collecting,  18-22 

monstrous  penalties  of,  19,  22 

shocking  indecencies  of,  20 

insults  to  women  by,  20 

extortions  through,  21 

enforced  by  spies,  fraud,  and  blackmail,  22 
widens  social  chasm,  22 
gives  profits  to  speculators,  23 
legislative  tricks  in,  24 
protective  duties,  24 
excise  duties,  26 
dealers'  profits  on,  26 
total  burden  of,  27 

proportion  of,  to  income  of  people,  35 
incidence  of,  35,  36 

concentration  of  wealth  through,  36,  37 
Currency  problem,  caused  by  bad  taxation,  60-62 

Debts  cannot  increase  wealth,  51 

Deposits.     See  Banks 

Direct  taxation,  39 
practicable,  39 

always  adopted  by  new  communities,  39,  40 
on  incomes,  41-45.     See  Income  tax 
on  successions,  45-48.     See  Succession  tax 
on  personal  property,  49-105.     See  Personal  property 
on  improvements,  106-114.    See   Improvements 
on  ground  rents.     See  Natural  taxation 

Earnings  of  people  of  United  States,  28-30 


INDEX.  229 

Economical  government,  impossible  under  crooked  taxation, 

i3 

not  promoted  by  taxing  labor,  37 
Effects  of  natural  taxation,  199-223 

in  general,  199,  221-223 

stimulus  to  production,  199,  200 

on  wages,  201-204 
real,  201 

in  money,  202,  203 
amount  of  rise,  203 

on  capital,  204—206 

on  security  to  property,  206-209 

on  railway  problem,  209 

on  monopolies,  210 

on  watered  stocks,  211 

on  corrupt  grants,  212—214 

on  usurped  lands,  215 

on  reform  in  government,   216-218 

on  bribery,  217 

on  tenement  houses,  218—221 

generally,  221-223 
Embargo  of  1807,  14 

England,  taxation  of  personal  property  in,  70 
Enough,  one  tax,  136-164 

adverse  views  considered,  136-139 

in  Boston,  138,  152-156 

in  Great  Britain,  143-145 

in  United  States,  145-147 

in  Pennsylvania,  147-150 

in  Connecticut,  150-152 

generally,  156-158 

in  rural  districts,  158 

Europe,  taxation  of  personal  property  in,  70 
Excisemen  hated,   19 
Excise  taxes,  methods  of  collecting,  19 

burdens  resulting  from,  26 


230  INDEX. 

Experience,  testimony  of,  70-83 
of  England,  70 
of  Rome,  73 
of  Spain,  73 
of  New  York,  75 
of  California,  76-81 
of  Boston,  81-83 
of  Ohio,  88-97 
of  Missouri,  98 

Farmers,  hold  most  visible  chattels,  63 
effect  of  personalty  tax  on,  84-100 
believe  in  personalty  taxes,  84,  183 

taxing  everything,  183 
personal  property  of,  85-87 
ideas  of,  86 
errors  of,  87 

Ohio,  experience  of,  88-98 

pay  largest  share  of  taxes,  on  personalty,  88-90,  96,  98 
Missouri,  experience  of,  98 

on  credits,  90-92,  95 

on  money,  93,  95,  97 

reasons  why,  99,  100 
improvements,  108,  in 
American,  defined,  182,  183 
their  opinions,  183 
assumed  to  be  all  farm-owners,  183 
ceasing  to  own  land,  184 
a  declining  political  factor,  184,  185 
lose  by  taxing  improvements,  185—191 
proportion  of  land  values  of,  187-190 
compared  with  city  owners,  190 
gain  under  natural  taxation,  191-193 
relieved,  without  injustice  to  others,  193 
Massachusetts,  194-198 

insist  on  paying  heavy  taxes,  196,  197 


INDEX.  231 

Farms,  taxed  more  heavily  than  cities,  88-100,  196,  197 
assessment  of,  188-190 
statistics  of  Massachusetts,  194-198 
value  of  improvements  in,  187 
Franchises,  taxation  of,  124-128 
railway,  125-127 
telegraph,  127 
gas,  electric,  etc.,  127 
untaxed,  128 
bribe-bought,  210,  212-214 

General  property  tax,  49 
See  Personal  property 
Gibbon's  History  of  Rome,  73 
Giffen,  Robert,  143 

Government,  ground  rent,  depends  on,  116 
varies  with  cost  of,  116 
should  pay  for,  119 
should  pay  only  fair  cost  of,  132-134 
sufficient  for  cost  of,  136-164 
cost  of.     See  Taxes 
gives  all  land  value,  158,  159 
necessary,  cannot  cost  more  than  rent,  159—164 
proper  distribution  of  cost  of,  160—164 
Great  Britain  and  Ireland,  rents  and  taxes  in,  136,  137,  143-145 

land  values  in,  144 
Greeley,  Horace,  13 
Ground  rent,  what  it  is,  116 
Ricardo  on,  116,  117 
justice  of,  117 
taxation  of,  119 

equality  of,  120 

practicable,  121 

accuracy  in,  121 

effect  on  monopolies,   125-128 

cannot  be  shifted,  129-132 


232  INDEX. 

Ground  rent,  taxation  of,  amount  of,  132 

sharing  benefits  of,  134 
amount  of,  in  Great  Britain  and  Ireland,  136, 137,  143,  144 

in  Boston,  138,  152-156 

in  United  States,  143-147 

in  Pennsylvania,  147-150 

in  Connecticut,  150-152 

in  rural  districts,  158 

exceeds  cost  of  government,  159,  162—164 

in  new  territories,  167,  168 
delegated  taxation,  165 
ought  to  bear  all  taxes,  166 
no  claim  to  exemption,  172 
Gunton,  George,,  on  rent,  137 


Harris,  William  T.,  on  rent,  137 
Hudson,  Frederick,  on  railways,  210 


Improvements,  taxation  of,  106 
a  tax  on  chattels,  106 
not  direct  taxation,  106-109 
on  buildings,  107 
falls  on  tenant,  108 
on  cultivation,  108 
consumers,  109 
injurious  to  public,  109 
discourages  production,  no 
beauty,  no,  in 
repairs,  no,   in 
punishes  improvement,  110-112 
causes  bad  building,  in 
equality  of,  impracticable,  112—114 
effect  on  farmers,  185-198.     See  Assessments  j  Farmers 
none  under  natural  taxation,  207 


INDEX.  233 


Incidence  of  taxation,  under  present  system,  35 

by  classes,  36 
under  natural  tax,  174 
on  landless,  177 
on  land-owners,  177-182 
on  largest  land-owners,  181 
on  owners  of  vacant  land,  182 
on  farmers,  182-194.     See  Farmers 
See  Burden  of  taxation 
Income  of  United  States,  28-35 
for  1866,  31 
for  1880,  32 
Income  tax,  returns,  in  United  States,  30—32 

in  Great  Britain,  33 
general,  induces  perjury,  41,  45 
always  evaded,  41,  42 
excuses  for,  42 
not  all  direct  tax,  43,  44 
unfit  for  local  use,  44 
Indirect  taxation,  6-38 

taxes  on  improvements,  107-109 
See  Crooked  taxation 
Injustice,  justice  remedy  for,  210,  216 
Inventors  entitled  to  wealth,  211 

Justice  of  natural  taxation,  165-173 
privilege  implies  duty,  165,  166 
illustrations,  166-168 
objections  to,  169 

confiscation,  169 

class  legislation,  169 

compensation,  170-173 

Landless  class  in  United  States,  175,  176 
gain  by  taxation  of  ground  rents,  177 


234  INDEX. 

Landlords,  natural  tax-gatherers,  118 

taxes  on,  119,  129-134 

denouncing  tax  on  rent,  129 

cannot  recover  rent-tax,  129-131 

can  recover  house-tax,  131 

benefits  of  rent-tax  to,  134,  135 
Land-owners  in  United  States,  175,  176 

effect  of  taxation  of  ground  rents  on,  147,  177-182 

gain  by  most,  178 

different  classes  of,  180 

loss  by  a  few,  180,  181 
Land,  usurped,  215 
Land  values,  what,  71,  126,  127 

taxes  on,  119-134,  136-164 

how  ascertained,  139,  140 

proportion  in  real  estate,  141-143 

See  Ground  rent ;  Natural  taxation. 

in  Great  Britain,  136,  137,  143,  144 

in  Boston,  138,  152-156 

in  United  States,  143-147 

in  Pennsylvania,  147-150 

in  Connecticut,  150-152 

in  rural  districts,  158 

in  new  territories,  167,  168 


Mallock,  W.  H.,  136,  139 

Massachusetts,  expenses  of  small  towns  in,  163 

farm  values,  194-198 

city  values,  195,  196 

farmers  insist  on  paying  largest  share  of  taxes,  196,  197 
McLeod,  H.  D.,  theory  of  credits,  50 
Merchandise,  assessment  of,  65 

would  vanish,  67 
Mistakes  in  new  tariffs,  23 

profits  made  out  of,  23 


INDEX. 

Money,  taxation  of,  57-60 
in  bank,  57 
paper,  58 
coin,  58 

scarcity  of,  60,  61 
demand  for  more,  61 
problem  result  of  bad  taxation,  60-62 
Monopolies,  best  cure  for,  210-216 
See  Franchises  •  Railways 

Natural  taxation,  115-135 
what  it  is,  115 
automatic,  115 
irresistible,  115,  118 
ground  rent  is,  116 

defined,  116,  117 

Ricardo  on,  116,  117  note 

justice  of,  117,  118 

who  receive,  118,  119 

should  pay  all  expenses,  119 

assessment  of,  121-124.     See  Assessments 
collection  free  from  objectionable  methods,  120 
on  franchises  and  monopolies,  124-128 

See  Franchises 
cannot  be  shifted,  129—132 
amount  of,  132 

benefits  of,  shared  with  landlords,  134 
effects  of,  199-223.     See  Effects  of  natural  taxation 

Oaths,  taxation  by,  74-77 

reverence  for,  74,  102 
Oklahoma,  opening  of,  167,  172 

original  taxes  in,  167 

ground  rents  in,  168 

landlords  and  taxes  in,  168 


236  INDEX. 

Pennsylvania,  rents  and  taxes  in,  147-150 

land  values  in,  148,  150 
Perry,  Professor,  i 
Personal  property,  taxation  of,  49-105 

credits,  50-57.     See  Credits 

money,  57-60.     See  Money 

banks,  60-62.     See  Banks 

visible  chattels,  62-69.     See  Chattels 

merchandise,  64-68.     See  Merchandise 

assessments  for,  63-69     See  Assessments 

history  of,  70,  72,  73 

experience  of,  70-100 

always  a  failure,  72-83 

Roman  methods,  73 

Spanish  methods,  73 

American  methods,  73-83 

by  oath,  74 

perjury  under,  74,  76,  77 

in  New  York,  75 

in  California,  76-81 

in  Boston,  81,  82 

in  Illinois,  83 

in  Ohio,  88-98 

in  Missouri,  98,  99 

effect  on  farmers,  84-100.     See  Farmers 

effect  on  women  and  children,  101-105.     See  Women 
Philadelphia,  land  values  in,  141,  142 
Poverty,  taxation  of,  8 
Problems,  currency,  60 

tenement-house,  218-221 

Production,  stimulated  by  natural  taxation,  199,  200 
Professors  on  taxation,  i 
Profits,  on  tariff  taxes,  23-26 

on  excise  taxes,  26 

on  indirect  taxes,  26,  27 

amount  of,  27 


INDEX.  237 

Profits,  increased  by  tax  reform,  205 
Property,  security  of,  under  natural  taxation,  206 
Protective  taxes,  profits  made  out  of,  24 
burdens  resulting  from,  24-26 

Railways,  franchises  of,  125-127 

problem  of,  209 

"watered"  stocks,  211 

street,  franchises,  212 

Broadway,  214 

remedy  for  corrupt  grants  of,  212-214 
Reform,  in  government,  216 

"  a  mere  fiscal,"  210 
Rich  and  poor,  taxation  on,  8,  22-37 
Robbery,  vested  rights  in,  6,  7 
Roman  taxation,  73 

Savings  of  people  of  United  States,  33-35 

Shaw,  Chief- Justice,  155 

Social  chasm,  result  of  crooked  taxation,  22—37 

Stocks,  "watered,"  211 

Succession  tax,  45-48 

popularity  of,  45 

how  evaded,  46 

not  fit  for  exclusive  tax,  46 

oppressive  on  widows,  46,  47 

leads  to  public  waste,  47 
Sufficiency  of  natural  taxation,  136-164 

See  Enough,  One  tax 
Sugar,  taxes  on,  n,  12 
Sumner,  Professor,  i 

Taxation.  See  Bad  taxation;  Burden;  Crooked  taxation  j 
Direct  taxation  ;  Effects  /  Enough,  one  tax  ;  Improvements  ; 
Incidence  ;  Justice  j  Natural  taxation,  j  Personal  property  • 
Women 


238  INDEX. 

Taxes,  in  Boston,  138 
in  Great  Britain,  143 
in  United  States,  147 
in  Pennsylvania,  148,  149 
in  Connecticut,  150,  151 
in  Boston,  152,  153 
proportion  of,  to  ground  rents,  136,   138,   145,   147,  149, 

15°,  T52»  153,  J56,  I57 
Tenants,  willing  to  pay  rent,  115 

competition  of,  115 

do  not  pay  too  much,  117 

rent-tax  not  shifted  on,  129-132 

house-tax  shifted  on,  131 

sub-letting,  132 

influences  reducing  rent  of,  134 
Tenement-house  problem,  218-221 
Trustees,  taxation  of,  102,  103 

pious  scruples  of,  102 

wicked, 103 

United  States,  rents  and  taxes  in,  145-147 
classes  in,  174—176 
families  in,  175 
land-owners  in,  175,  176 
landless  in,  175,  176 
tenants  in,  175 
landless  voters  in,  176 

Vanderbilt,  Cornelius,  112 

Wages,  effect  of  natural  taxation  on,  201-204 

immigration  and,  202 

of  domestics,  203 

probable  amount  of  rise  in,  203 
Wells,  David  A.,  25,  74,  112 
Western  Union  Telegraph  Co.,  127 


INDEX.  239 

Whisky  tax,  n,  12 

corruption  in,  18 
Women,  taxation  of,  101-105 

heavier  than  on  men,  75,  101,  104,  105 
through  trustees,  102 
returns  honest,  103 
stripped  by  tax-searchers,  20 
clothing  exposed,  20 

taxed  and  seized,  21 
insults  and  oppressions  of,  20,  21 
oppressed  by  succession  tax,  46 


rERSITY  \ 


63—  Wa, 

"'FA. 

64—  Th-  ~ 

1 

a 

HOME  USE 

25 

ELLS  ; 

65-A 
I 

CIRCULATION  DEPARTMENT 

25 

;r  and 

66-Th 

MAIN  LIBRARY 

25 

P 

This  book  is  due  on  the  last  date  stamped  below. 

apital 

67—  Th 
68—  Pa 

1  -month  loans  may  be  renewed  by  calling  642-3405. 
6-month  loans  may  be  recharged  by  bringing  books 
to  Circulation  Desk. 

i  25 
i  50 
lliam 

70-Th 

Renewals  and  recharges  may  be  made  4  days  prior 
to  due  date. 

I    00 

71—  Wl 

ALL  BOOKS  ARE  SUBJECT  TO  RECALL  7  DAYS 

•     75 

S; 

AFTER  DATE  CHECKED  OUT. 

s  G. 

i  25 

73-Th. 

WOV25  197432 

1  25 
3r  of 

74     Th< 

i    *_ar-rriOT  \ninriL  J  r  ,Wv  V-'a'*'!-*  '^ 

I  50 

w. 

75-AE 
th 

i*£'0  GftC  Uft3        vvs,  ^  i'j^ 

75 
e  in 

Cc 

r  DE 

76—  Inrf, 

i  25 

Lc 

1  198J 

HAW 

75 

77  —  Prir 

Pa 

is  of 

78—  Can 

Yin*  PH?      HIM  9  Q  1381 

75 

Fe 

rial 

79  —  Join 

75 

I    OO 

80—"  Co 

PTT 

ARY 

[    OO 

8  1—  The 

^ON. 

Par 

2O 

82-A  Sc 

red. 

TCy 

83—  Natt 

75 

pap 

oo  ; 

84—  Real 

50 

Ev] 

By 

8c      f*nno 

75 

86  —  Mon< 

LD21—  A-40m-5,'74                          General  Library 

25 

Hi! 

(R8191L)                             University  of  California 
Berkeley 

of 

87—  Amei 
88—  The 

50 

TOURGEE 

89—  A  General 

Freight  and  Passenger  Post.     By  JAMES  L. 

, 

COWLES 

. 

50—  Municipal 

Reform.     By  THOMAS  C.  DEVLIN          .        .             x 

/o 
00 

QUESTIONS    OF    THE    DAY. 


AUTHOR   INDEX    TO    THE 
"QUESTIONS   OF   THE    DAY"   SERIES. 


Alexander,  E.  P.,  No.  36 
Allen,  J.  H.,  No.  53 
Atkinson,  E.,  No.  40 
Bagehot,  W.,  No.  28 
Baker,  C.  W.,  No.  59 
Blair,  L.  H.,  No.  35 
Bonham,  J.  M.,  No.  6r 
Bourne,  E.  G.,  No.  24  ' . 
Bowker,  R.,  R.,  No.  10 
Bruce,  P.  A.,  No.  57 
Cleveland,  G.,  No.  48 
Codman,  J.,  No. 
Cowles,  J.  L., 
Dabney,  W. 
Devlin, 
Doni 


.fchrich,  L.  R.,  No.  70 
Elliott.  J.  R.,  No.  62 
Foote,  A.  R.,  No.  82 
Ford,  W.  C.,  Nos.  5,  6 
Foulke,  W.  D.,  No.  43 
Giffen,  R.,  No.  20 
Gordon,  A.  C.,  No.  85 
Hall,  B.,  No.  71 
Hitchcock,  H.,  No.  37 


Jacobi,  M.  P.,  No.  80 
Jones,  W.  H.,  No.  39 
Juglar,  C.,  No.  75 
Lawton,  G,  W.,  No.  25 
Lowell^     S.,  Nos.  13,  70 

.,  No.  44 

x,  No.  50 

.,  No.  42 

.,  No.  66 

J.,No.  87 

"  N°-  52 

.  H.,  No.  67 
>.  S.,  No.  77 
.,  T.,  No.  49 

uhof,  J.,  Nos.  9,  30,  73,  86 
aurz,  Carl,  No.  87 
Shearman,  Thos.  G.,  No.  83 
Sherman,  Hon.  P.,  No.  65 
Shriver,  E.  J.,  No.  63 
Smith,  R.  H.,  No.  26 
Stokes,  A.  P.,  No.  79 
Storey,  M.,  No.  58 
Strange,  D.,  No.  72 
Taussig,  F.  W.,  Nos.  47,  74 
"  Tax-Payer,"  No.  55 
Tourgee,  A.  W.,  No.  88 
Tyler,  L.  G.,  No.  68 
Wells,  D.  A.,  Nos.  3,  54,  64,  71,  87 
Wheeler,  E.  P.,  No.  84 
Winn,  H.,  No.  46 


G.  P.  PUTNAM'S  SONS,  PUBLISHERS, 

NEW  YORK  LONDON 

27  and  29  West  23d  Street  24  Bedford  Street,  Strand 


